German consumer prices dipped in December as a fall in the prices of household energy kept a lid on inflation at the end of 2017.
Many believe, however, that consumer price inflation would gather momentum in 2018 as the impact of higher oil prices feeds into headline inflation in the coming months.
Consumer price index (CPI)
Germany's headline consumer price index rose at an annual pace of 1.7% in December - down from 1.8% in November, according to data from Destatis.
Food prices in 2017 were markedly higher, the statistics office said - up 3% year-on-year in December after rising by 3.2% year-on-year in November. Edible oils and dairy products rose at the fastest pace among the food product groups.
Energy price growth slowed and only had a small impact on the overall inflation rate in December, but consumer goods rose sharply with newspapers and publishing up 5.1%, tobacco up 4.6% and pharmaceuticals up 2.6%.
Rising oil prices
Analysts, however, believed the CPI rate would gain momentum in the coming months as the impact of rising oil prices begins to be felt by motorists, and in household heating bills.
"The recent increase in oil prices suggest that the rate of increase in energy prices will increase significantly in the first six months of 2018," said Claus Vistesen at Pantheon Macroeconomics.
The European Central Bank has a firm mandate to keep a lid on inflation, and overall in the eurozone consumer prices remain subdued at 1.5% - a key factor in recent policymaking as the ECB governing council remains "accomodative" and continues its tapered asset purchase programme until September.
But with annual growth in the eurozone beginning to heat up, some members of the ECB's policy council are becoming more hawkish, as displayed in the minutes of the central bank's last policy meeting when some members suggested changes to its forward guidance.
Hussein Sayed at FXTM said: "Comments from ECB’s governing council member Adro Hansson yesterday, suggested that the bond-buying program could end entirely in September, if the data warranted. So, I believe inflation figures in the next three months will be a key metric to determine whether the ECB will put an end to stimulus."
There was little reaction to the data. The euro was a little lower following recent gains, dipping 0.15% against the dollar to $1.2248. The pound rose 0.08% to €1.1256.