Energy prices fell 5.3 per cent year-on-year in January, less steeply than the December decline of 5.8 per cent or November’s 7.3 per cent. Unprocessed food prices grew more slowly at 1.8 per cent annually against a 2.0 per cent rise in December.
Advertisement
Core inflation, excluding energy, food, alcohol and tobacco, increased slightly to 1% in January from 0.9% in December. The acceleration may prove temporary as oil prices are at their lowest in more than a decade and may slide more as a global supply glut worsens with Iran returning to the markets after the end of worldwide sanctions and oil-producing nations haven’t sought an agreement to curb output.
The stock increased 0.79% or $125.18 on January 28, hitting $16069.64. Inflation has been below target since February 2013. Consumers could decide to postpone spending if they think prices are likely to continue falling, while businesses fail to generate the profit margins they need to invest and innovate.
The outlook for inflation is likely to hinge heavily on oil prices.
The headline figure is closer to the ECB’s near-2% target but not close enough to change the mind of ECB President Mario Draghi, whose comments last week were interpreted as “pre-announcing” an easing of policy, analysts say.
In December, the central bank eased monetary policy further to fight low inflation but kept much of its powder dry, disappointing market hopes of more stimulus. The bank did increase stimulus at that meeting by extending its bond purchases by six months and by cutting the rate on deposits from commercial banks from minus 0.20 percent to minus 0.30 percent, a step aimed at pushing banks to lend money rather than hoard it.
Headline inflation in the 19-country bloc rose to 0.4pc at the start of the year, according to a flash estimate from Eurostat, up from 0.2pc in December.
Advertisement
“We still expect the European Central Bank to revise its (core inflation) forecasts sharply downwards in March, which will clear the way for further expansionary measures”, said Christoph Weil, an economist at Commerzbank.
