Eurozone: Inflation Takes off in December

Finance
Inflation in the Eurozone has increased in December

Economic: The recovery in energy prices contributed to the increase in inflation in the euro zone in December 2016. Good news for the ECB according to experts.

Inflation in the euro area continued to accelerate in December to 1.1%, against 0.6% in November, driven by a rise in energy prices, according to preliminary estimates released Wednesday by the European Office Eurostat statistics.

The last time inflation reached this level was in September 2013. This figure is better than expected by analysts polled by the financial services provider Factset, who had forecast 1.0%.

This new increase is good news for the European Central Bank (ECB), which for the past two years has been trying to boost prices.

Rising energy prices

But this figure is still far from the objective it set itself an inflation of almost 2.0%, a level deemed beneficial to economic activity.

The underlying inflation (excluding energy, food, alcoholic beverages and tobacco) – more indicative of the trend because it excludes the most volatile products – also rose slightly to 0.9%. It was 0.8% in November, a figure that was unchanged since August.

Inflation has started an increase in recent months in the euro area as a result of the gradual recovery in energy prices. In December, they rose 2.5% after falling 1.1% in November.

Good news for the ECB?

“The European Central Bank (ECB) will be glad to see inflation jump to 1.1% in December, which is its highest level since September 2013” , said Howard Archer, IHS analyst, commenting on this first estimate the European statistics Office, Eurostat. “For the ECB, this acceleration is undoubtedly a positive development” , added his colleague Jesus Castillo, Natixis analyst.

Based in Frankfurt, the ECB backs for two years to try to boost prices. But Wednesday’s figure is still far from the objective it set itself an inflation of almost 2.0%, a level deemed beneficial to economic activity.

For Mr. Archer, “it is highly probable that inflation will continue to rise in the coming months due to base effects due to changing energy prices: in January 2016, oil prices had reached the lowest since 12 years and therefore necessarily their rise will affect the evolution of consumer prices ” .

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