Euro area headline inflation slows in December on weaker energy prices, core rate to reach 1 pct in 2018

The headline consumer price inflation for euro area decelerated in the month of December, owing to weaker rise in energy prices. The consumer price index dropped to 1.4 percent from 1.5 percent. The core inflation rate, which strips energy, food, tobacco and alcohol, remained at 0.9 percent year-on-year, as compared with consensus expectations of 1 percent. The average core rate for 2017 also came in at 0.9 percent and therefore just marginally higher than 0.8 percent seen in 2016.

The temporary rise in the spring to 1.2 percent was mostly due to the price leap in package holidays and accommodation. Tourism firms had increases prices considerably after the crisis in Turkey caused demand in other Mediterranean nations to soar. The pace of inflation for these services had accelerated to 7.6 percent in March.

The headline consumer price index dropped further in December to 1.4 percent, thanks to the declining inflation rate for energy that fell to 3 percent in December from 4.6 percent in November. Consumer prices, on average in 2017, rose 1.6 percent as compared to 1.5 percent in 2016.

The data released today indicated that solid economic growth and the marked decline in unemployment have so far not resulted in a lasting stronger underlying upward price trend.

“We expect a core inflation rate of 1.0 percent in 2018. Only in 2019 should the rate lastingly rise above 1 percent”, stated Commerzbank in a research report.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -6.80745, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -82.6398. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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