Stock indices closed higher as inflation in the U.K. declines to the lowest level since May 2000.

The U.K. consumer price index declined to an annual rate of 0.5% in December from 1.0% in November. Analysts had expected the consumer price inflation to decrease to 0.7%.

On monthly basis, consumer price inflation in the U.K. was flat in December, missing forecasts of a 0.1% rise, after a 0.3% decline in November.

Consumer price inflation excluding food, energy, alcohol, and tobacco increased to an annual rate of 1.3% in November from 1.2% in November. Analysts had expected the consumer inflation to climb to 1.4%.

The Bank of England's inflation target is about 2%.

Investors speculate that Bank of England will keep interest rates on hold for a longer period.

The Bank of England Governor Mark Carney said in an interview with the BBC on Tuesday that he expects inflation to decline in coming months, but he believes inflation will be near the central bank's 2% target within two years.

There were released no major economic reports in the Eurozone.

The European Central Bank (ECB) executive board member Benoit Coeure told German newspaper Die Welt that the central bank has discussed about whether to implement a sovereign bond-buying programme last week. He noted that the ECB could take a decision on its policy meeting on January 22.

Coeure pointed out that Greece's parliament election on January 25 would not influence the ECB's monetary policy.

Indexes on the close:

Name Price Change Change %

FTSE 100 6,542.2 +40.78 +0.63%

DAX 9,941 +159.10 +1.63%

CAC 40 4,290.28 +62.04 +1.47%