Euro zone inflation touches 0.9 per cent

The annual rate of inflation in the 16-nation euro zone hit a 10-month high of 0.9 per cent in December aided by monetary and fiscal-stimulus measures taken up by the member nations, the European Union statistics agency Eurostat said yesterday.

However, the preliminary estimate remains well below the European Central Bank's (ECB) medium-term target of just below 2 per cent.

December's figures offered some relief for the ECB, pointing to a reduced risk of deflation.

The Eurozone economy returned to positive inflation for the first time in seven months in November when it touched 0.5 per cent. Much of the inflation then has been due to increased energy costs.

Analysts say the still low inflation means the Frankfurt-based central bank is likely to keep its benchmark interest rate unchanged at the historic low of 1 per cent when it meets next week.

Inflation fell sharply in 2008 as a result of tumbling oil prices, which touched a low of $40 per barrel. Now the prices have picked up and the oil is selling at around $80 per barrel.