Annual inflation in the euro zone ticked up to 2.3 per cent in December, driven in the main by sustained price pressures in the services sector.
The climb of 0.1 percentage points has left inflation in the 12-state currency area above the European Central Bank's (ECB) targeted 2 per cent ceiling for the fifth consecutive month.
Core euro-zone inflation, which excludes the volatility associated with energy and unprocessed food, at 2.3 per cent, has also remained above the self-imposed limit.
Consensus opinion suggests that price growth may be on the point of turning, however, with the European Commission yesterday reaffirming its forecast of a decline in coming months.
The news of December's inflation rate came as ECB council member, Mr Ernst Welteke, said the prospects of an imminent reduction in euro-zone interest rates hinged on price trends. Mr Welteke told the Financial Times the bank had space to cut rates, but final decisions would depend on consumer prices. Most economists expect the ECB to slice up to 50 percentage points off its key rate before the summer to stimulate a consistently sluggish euro-zone economy.
Mr Welteke also said the dollar, which allowed the euro to break through the $1.07 barrier on Tuesday, needed no support on foreign exchange markets. The euro maintained its gains yesterday, reaching a high of $1.074 before falling back to $1.072 last night.
Mr Aziz McMahon, foreign exchange analyst with ABN Amro in London, said the euro's next big technical barrier against the dollar would come at $1.09.
Based on the patterns of recent weeks, this breakthrough could come quickly, according to Mr McMahon.
"It doesn't seem likely to struggle," he said, adding that the prospect of a Japanese intervention in currency markets would be unlikely to interrupt momentum in the dollar's downward path.
Mr McMahon said December's euro-zone inflation rise would not distract the ECB from its intention to cut rates. He predicts a reduction of 50 points in March.
Detail contained with the price data shows that the Republic remains at the top of the inflation league within the euro zone, with an annual rate of 4.6 per cent.
