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Feb 14 Reuters European stocks ended modestly higher on Tuesday following upbeat corporate updates but pared most early gains as investors grappled with mixed U.S. inflation data that kept alive expectations of more Federal Reserve rate hikes.

The continentwide STOXX 600 index closed 0.1 higher, after touching a near oneyear peak earlier in the session.

The U.S. Labor Department39;s highly anticipated report showed consumer prices accelerated in January, but there were signs of a slowdown in price pressures which could keep the Fed on a moderate interest rate hiking path.

European markets were reacting to the U.S. inflation data, given expectations that the European Central Bank ECB and the Bank of England would likely follow the Fed in its monetary policy decisions, said Stuart Cole, head macro economist at Equiti Capital.

If you are an inflation hawk, you could easily take today39;s numbers and say that further interest rate rises from the Fed are needed. But, for the inflation doves, there is enough there too to say overall underlying pricing pressures remain on a downwards trend.

Closer to home, data showed euro zone employment grew twice as fast as expected last quarter, pointing to greater underlying inflation pressures that could keep interest rates high for longer.

ECB governing council member…