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Eurozone inflation increases to 0.4%

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Headline inflation in the eurozone has risen, but it remains well below the European Central Bank's (ECB) target of close to 2%.

ECB President, Mario Draghi has already indicated another stimulus package could be unveiled as soon as March.

The figures from the European Union's statistics office, Eurostat showed consumer prices were up 0.4% in January compared with a year earlier.

It is double the rate of inflation in December.

In the year to January energy prices fell 5.3% although that was less steep than in previous months.

Core inflation, which strips out volatile food and energy prices, rose to 1% from 0.9% in December.

The ECB has taken drastic steps to try to bolster price growth.

Is deflation such a bad thing?

It has introduced negative interest rates, which means commercial banks have to pay it to keep their money rather than the reverse.

This is designed to encourage banks to lend money, rather than sitting on cash.

It has also spent billions buying assets from banks, under its quantitative easing programme, to push more money into the economy.

What is quantitative easing?

In December, the ECB extended its €60bn-a-month stimulus programme by six months to March 2017.

Timo del Carpio, European economist at RBC Capital Markets, said: "Rather than representing the start of a convincing, upward trend, we view today's upturn as a transitory hiccup in an otherwise lifeless path for inflation."

Fluctuating oil prices will continue to create uncertainty about price growth in the months to come.

At the beginning of 2016, oil prices plunged on the back of concerns about the Chinese economy, global trade, uncertainty in the Middle East and oversupply.

Oil prices have recovered slightly following speculation that the Opec cartel and other suppliers are considering cuts to production.

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