Eurozone inflation down to 1.3 pct in January

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Eurozone annual inflation is expected to be 1.3 percent in January, down from 1.4 percent in December mainly due to the fall in energy and food inflation rates, the European Union (EU) statistics agency has said.

In a statement, Eurostat said the inflation drop was driven largely by the fall of energy inflation from 2.9 percent in the previous month to 2.1 percent in January, as well as the fall of unprocessed food inflation from 1.9 percent to 1.0 percent.

However, the core inflation rate, which excludes certain items facing volatile price movements such as food, energy, alcohol and tobacco, edged up from 0.9 percent to a still-low 1.0 percent.

“Looking ahead, energy effects look set to push headline inflation back up towards the ECB (European Central Bank)’s near-2 percent target in the summer. But we think that core inflation will rise only slowly,” said Jack Allen, European Economist of Capital Economics.

“Accordingly, the ECB will be very cautious about raising interest rates,” Allen said.

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