Eurozone inflation spikes on energy price effects

EUROZONE inflation rose to 0.9 per cent in December, its highest level since February, driven by energy price effects, data showed yesterday.

The region’s inflation rate was up from 0.5 per cent in November and a five-month period of deflation in the middle of last year, but remains well below the European Central Bank’s (ECB) target of just under two per cent.

Economists said the rise was primarily due to oil prices, which had fallen sharply at the end of 2008 and the beginning of 2009, adding that there was little reason for the ECB to worry about upward inflationary pressures for the rest of the year.

“There remains a compelling case for the ECB to only very gradually withdraw its emergency liquidity measures, and to keep interest rates down at one per cent not only at its January meeting next week but also deep into 2010,” said Howard Archer, economist at IHS Global Insight.