Core inflation pressures still very subdued

December’s rise in euro-zone CPI inflation, from 0.5% to 0.9%, left it at a ten-month high. But the increase was due to a further rise in energy inflation, which should soon begin to moderate. Meanwhile, the pressure on underlying or core inflation remains firmly downward. Wage growth has started to slow and looks set to fall much further. And, despite December’s increase, the EC measure of consumers’ inflation expectations suggests that core inflation might drop towards zero in the coming months.