Eurozone inflation was weaker than economists predicted in December, when the European Central Bank stepped up its stimulus programme. According to preliminary data from Eurostat, consumer prices remained unchanged at an annual 0.2 per cent, below expectations for a 0.3 per cent rise.

Predictably, low energy prices have been the most significant deflationary influence, as prices fell by 5.9 per cent, although this was less than the reduction of 7.3 per cent that was reported for November. Food, alcohol and tobacco prices rose by 1.2 per cent in December, but that was 0.3 per cent less than the previous month. Services prices were also higher last month, rising by 1.1 per cent. The services price rise was not as high as November, when they rose by 1.2 per cent.

In the meantime, preliminary figures published last week by Italy’s statistics office, Istat, showed that the country’s unemployment rate unexpectedly fell in November, reaching the lowest level in three years. The seasonally adjusted jobless rate dropped to 11.3 per cent in November from 11.5 per cent in October, the same rate as in September. Economists had predicted the unemployment rate to remain stable at 11.5 per cent.

November’s jobless rate was the lowest since November 2012, when it stood at 11.2 per cent. The number of unemployed people dropped 1.6 per cent monthly to 2.871 million in November. The youth unemployment rate, which covers the 15 to 24 age group, declined to 38.1 per cent in November from 39.3 per cent the previous month.

Finally, in the US, the minutes of the December meeting of the Federal Reserve Open Market Committee published last week show that policymakers decided on the first rate rise in 10 years after almost all of them gained confidence inflation was poised to rise.

However, some expressed concerns that inflation could get stuck at dangerously low levels. That, in addition to the stifling effects on the US economy of a strong US dollar and slow growth overseas, could restrain the Federal Reserve from additional rate increases in 2016.

The debate over the outlook for inflation will be central to decisions on how quickly to raise rates over the next year.

This report was compiled by Bank of Valletta plc for general information purposes only.