A year of zero inflation

December’s euro-zone consumer price inflation rate of +0.2% left an average inflation rate for 2015 as a whole of zero – the lowest rate since the single currency was formed. Headline inflation will almost certainly rise during 2016 as negative energy effects fade, particularly if oil prices recover somewhat from current very low levels. But with core (ex. food and energy) inflation set to remain subdued amidst weak cost pressures and continued spare capacity in the economy, higher headline inflation should not prevent the ECB from further increasing its policy support.