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Eurozone inflation rose to 2.9 per cent in December, reversing six months of consecutive falls and raising questions over how soon the European Central Bank will start cutting interest rates.
The annual rise of consumer prices in the 20 countries that share the euro in December was up from a more than two-year low of 2.4 per cent in the previous month and was slightly lower than the 3 per cent rate forecast by economists in a Reuters poll.
The reduction of government subsidies on gas, electricity and food that began last year has triggered a re-acceleration of annual inflation in much of Europe. This has led investors to scale back their bets that the ECB will start rate cuts as early as March.
The ECB, which is due to meet to discuss monetary policy on January 25, pushed back against investor expectations of imminent rate cuts last month, saying it wanted to see signs of wage pressures cooling to be sure inflation was on track to hit its 2 per cent target.
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