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Eurozone annual inflation slows more than expected on weaker energy prices

Annual inflation in the eurozone slowed more than expected on the back of weaker energy prices, according to Eurostat's flash estimate.

Consumer prices grew 1.6% in December 2018, compared with 1.9% growth in the prior month. The Econoday consensus estimate was for year-over-year inflation of 1.8%.

Energy inflation moderated to 5.5% from 9.1% as oil prices declined. Prices of food, alcohol and tobacco rose 1.8%, following an annual 1.9% increase in November 2018.

Annual core inflation, which excludes energy, food, alcohol and tobacco, held steady at 1.0%.

The European Central Bank has set a medium-term inflation target of below but close to 2%. The ECB in December 2018 revised its inflation outlook for 2018 to 1.8% from 1.7% previously, as it confirmed the end to its quantitative easing program after buying €2.6 trillion of European debt.

"Depending on how long oil prices remain in the $50 range, headline inflation could even fall to around 1%," Bert Colijn, senior economist for the eurozone at ING, wrote in a note. "This leaves the ECB in an awkward spot with regards to their first rate hike."

Brent crude oil prices were up 1.98% at $57.06 per barrel on the ICE Futures Exchange as of 5:12 a.m. ET on Jan. 4.