Euro zone inflation picks up to 0.4% in JanuaryFriday 29 January 2016 11.16
Euro zone inflation accelerated to 0.4% in January, from 0.2% the month before, official data showed today, suggesting European Central Bank efforts to boost the economy are finally bearing fruit.
Analysts said the figures, in line with expectations, would be welcome but they still remain way short of the ECB's official 2% target.
They said that today's figures were "a modest step in the right direction for the ECB", but largely reflected the slower pace of oil price falls and the ECB may have to do more to get the economy back on track.
The Eurostat statistics agency said the core inflation rate, excluding volatile energy and food costs, rose to 1% in January from 0.9% in December.
Energy prices alone fell 5.3% in the month, a sharp downturn but less than the 5.8% drop recorded in December.
Rising prices are a good indication that underlying demand is strong but the euro zone has been bedevilled by low inflation rates for years and tumbling oil prices have complicated the outlook.
Lower prices are positive for consumers initially, but if they continue falling, shoppers tend to put off purchases knowing they will be cheaper if they wait.
That in turn dampens demand, forcing companies to put off investment which hits jobs and disposable income, adding to downward pressure in a deflationary spiral.
ECB president Mario Draghi said last week he may have to do more, even though he has already pumped hundreds of billions of euros into the economy and cut interest rates to record lows.
Analysts said falling oil prices had increased fears of deflation but a weak euro which boosts exports and a continued recovery should just about hold the line.
Given the uncertain outlook, the ECB was likely to cut interest rates even further into negative territory and increase its monthly cash injections of €60 billion by another €20-30 billion, they predicted.