Euro zone inflation slows in January, core measure picks up

BRUSSELS (Reuters) – Euro zone consumer price growth slowed slightly in January but the core measure closely watched by the European Central Bank edged higher for the first time in months, data from the European Union’s statistics office Eurostat showed on Friday.

Eurostat said consumer prices in the 19 countries sharing the euro fell 0.9 percent month-on-month in January for a 1.3 percent year-on-year increase, confirming its earlier estimates and market expectations.

But unprocessed food prices rose 0.7 percent month-on-month for a 1.1 percent annual increase and energy prices jumped 1.8 percent during January for a 2.2 percent annual gain.

Without these two highly volatile components – or what the European Central Bank calls “core inflation” and watches in monetary policy decisions – prices fell 1.3 percent month-on-month and rose 1.2 percent year on year, accelerating from 1.1 percent in the previous three months.

An even broader measure of core inflation watched by some market economists, which in addition excludes alcohol and tobacco prices that can change with government hikes of excise tax, also increased to 1.0 percent year-on-year in January from 0.9 percent in the previous three months.

The ECB has been buying billions of euros of euro zone government bonds on the market to inject cash into the banking system and trigger greater credit to the economy to boost inflation, which it wants below, but close to 2 percent.

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