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.