Low inflation is the main reason why the European Central Bank has embarked on a series of stimulus measures over the past year.

Beyond the impact of energy prices, inflation remains subdued in an economy that is struggling to gain momentum - at least compared with the United States.

German inflation unexpectedly slowed, in a sign that price growth in the 19-nation euro area may also be weaker than anticipated. It is believed that the ECB's December meeting rhetorical misfire and subsequent EUR REER appreciation of more than 3% come at a longer-term cost to the EUR.

Meanwhile core inflation, closely watched by policy hawks like Germany's Bundesbank, eased to 0.8 per cent from 0.9 per cent in November and 1 per cent in October. The worry is that low inflation becomes entrenched and turns negative as it has done at times over the past couple of years.

"The ECB will probably soon have to give up hope of a stronger underlying price momentum this year". One of the ECB's doves, Vice President Vitor Constancio, meanwhile argued recently for steady policy for the "foreseeable future".

"The failure of euro zone inflation to pick up in December is good news for consumers' purchasing power; but it will maintain European Central Bank concern that prolonged very low inflation could lead to a renewed weakening in inflation expectations, thereby making it harder still to get euro zone consumer price inflation up to its target rate of close to 2 percent", Archer said in a note Tuesday. "While the January meeting will most likely be for wait-and-see, March could be more interesting".