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Euro zone Jan inflation muted at 1 pct as expected

Published 02/26/2010, 05:07 AM
Updated 02/26/2010, 05:12 AM

* Inflation -0.8 pct m/m, 1.0 pct y/y

* Core inflation -1.3 pct m/m, 0.9 pct y/y

BRUSSELS, Feb 26 (Reuters) - Euro zone inflation remained subdued in January, final data showed, signalling that a fragile economic recovery has yet to trigger price pressure that would encourage the European Central Bank to tighten monetary policy.

The European Union statistics office confirmed its earlier estimate that consumer prices in the 16-country currency bloc rose 1.0 percent year-on-year, up from 0.9 percent in December.

Month-on-month inflation was -0.8 percent in January, the data showed on Friday, in line with the expectations of analysts polled by Reuters. Prices fell for clothing, household equipment, communications, culture, hotels and restaurants.

Energy prices, which had long been falling and pushing inflation down, rose in January by 2.1 percent month-on-month for a 4.0 percent annual gain.

What the European Central Bank calls core inflation -- stripping out volatile unprocessed food and energy prices -- was 0.9 percent year-on-year and minus 1.3 percent month-on-month.

The ECB wants to keep consumer prices growing slightly below 2 percent annually over the medium term and is expected to hold interest rates at a record low of 1 percent until late 2010 or even 2011.

Economists say inflation in the euro zone could hover around 1 percent this year, with rising energy and food prices pushing it up and declining core inflation pressing it down. (Editing by Dale Hudson)

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