No stop signal for ECB in rising German inflation

Shoaib Ur Rehman July 30, 2019

FRANKFURT AM MAIN: Inflation picked up its pace in Germany in July, preliminary official data showed Tuesday, but remained too weak to dissuade the European Central Bank from new eurozone stimulus measures in the coming months.

Consumer prices grew 1.7 percent year-on-year this month, up from a 1.6-percent rate in June, federal statistics authority Destatis said.

Looking in more detail at the index, faster inflation in July was in part down to faster growth in food prices.

Energy costs grew at a steady pace and services inflation slowed.

Measured using the Harmonised Index of Consumer Prices (HICP) — the ECB’s preferred yardstick — inflation in Germany slowed, from 1.2 percent in June to 1.1 percent this month.

The pace is far from the just-below-2.0-percent rate targeted by the central bank across the eurozone under its price stability mandate.

Last month saw inflation of just 1.3 percent in the 19-nation single currency bloc.

“With negative base effects from oil prices and the cooling economic outlook, German headline inflation will, in our view, continue to fluctuate between one and 1.5 percent in the coming months,” ING bank economist Carsten Brzeski predicted, “adding to the arguments for new ECB action in September”.

At a gathering last week, central bank governors opened the way for a cut further into negative territory for the rate of interest on lenders’ deposits at the ECB.

They also confirmed they are considering restarting “quantitative easing” (QE) mass bond purchases later this year.

Copyright AFP (Agence France-Press), 2019

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