- Jennifer McKeown, Capital Economics
Euro zone consumer inflation remained stubbornly weak in December, underscoring challenges for the European Central Bank to boost inflation. Consumer prices in the 19-nation bloc climbed 0.2% on an annual and seasonally adjusted basis in the final month of the year. Policy makers and economists expected inflation to pick up, since oil prices were predicted to remain steady. However, with oil prices renewing the slide as 2015 drew to a close, those hopes have been fanned, adding to signs the ECB will embark on additional stimulus measures this year. The annual rate of inflation has been below the central bank's target since March 2013, and below 0.5% since July 2014. Declining oil prices have been the main contributor, falling 5.9% in the 12 month through December. At the same time, the core measure, which strips out alcohol, tobacco, food and energy, increased 0.9% in the reported month.
Nevertheless, oil prices are not the only factor keeping inflation stubbornly low. While the Euro bloc's economy returned to growth in mid-2013, its recovery has been fragile, with the unemployment rate of around 11% and leaving businesses with large amount of spare capacity and little pressure to increase prices.
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