German inflation slows sharply as ECB dials back stimulus

Parvez Jabri December 28, 2018

BERLIN: German annual inflation slowed sharply in December, slipping below the European Central Bank’s target level just as it ended a crisis-fighting bond purchase scheme after four years and as global markets slumped.

German consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose by 1.7 percent year-on-year after an increase of 2.2 percent in the previous month, the Federal Statistics Office said on Friday.

A Reuters poll had suggested the annual harmonised consumer price inflation (HICP) rate would slow to 1.9 percent.

The ECB targets inflation of close to but below 2 percent for the euro zone as a whole. December’s weaker German annual inflation rate was marked by a pronounced slowdown in energy price rises.

On the month, EU-harmonised prices rose by 0.3 percent, the preliminary numbers showed, compared with the forecast for a 0.4 percent increase.

In a precarious balancing act, the ECB earlier this month formally ended its 2.6 trillion euro ($2.98 trillion) bond-buying scheme but promised to keep feeding stimulus for years into an economy struggling with an unexpected slowdown and political turmoil.

The ECB said on Thursday the global economy is set to slow down in 2019 and stabilise thereafter, but it still expected prices to rise.

Copyright Reuters, 2018

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