Eurozone CPI improves in line with expectations

Eurozone inflation improved in line with expectations in December, driven by higher prices charged at restaurants and cafes, Eurostat revealed.

The consumer price index rose 0.2% in December, up from 0.1% in November but well below the European Central Bank’s target of just below 2%.

Eurostat said an increase in price at restaurants, cafes, tobacco and vegetables was offset by declines in fuels for transport, heating oil and gas. The slump in oil prices has weighed on inflation, prompting the ECB to take further stimulus measures.

The ECB in December decided to lower the deposit rate by 10 basis points to -0.30% and extended the asset purchase programme until March 2017 or “beyond if necessary”.

“Today’s inflation figures suggest that ECB President Mario Draghi’s renewed stimulus plan isn’t yet having the desired effect, and the two per cent target is still a long way off,” said Dennis de Jong, managing director at UFX.com.

“Record low oil prices, alongside volatility in China and elsewhere, have taken their toll on major economies the world over and the Eurozone is no different. With a stimulus programme in effect and no real room to manoeuvre interest rates further, Draghi is running out of options. “

De Jong added that Draghi will be hoping that the slump in oil prices will boost consumer spending power and push inflation higher.