Berlin: German consumer inflation eased more than expected in May to fall well below the European Central Bank’s 2 percent target, data showed on yesterday, taking some pressure off the ECB to wind down its monetary stimulus in the near term.
Spain also reported easing inflation. Together, the two suggest that May euro zone inflation to be reported today will fall to at least the 1.5 percent predicted in Reuters polls from the previous month’s 1.9 percent.
For Germany, the surprisingly weak figures suggested that price pressures remain relatively modest despite a continued upswing, booming labour market and the ECB’s loose monetary policy.
With euro zone growth on its best run since the bloc’s crisis took hold a decade ago, pressure from Germany and other countries has been mounting on the ECB to start planning an exit from its policy of aggressive bond purchases and sub-zero rates.
However, ECB President Mario Draghi (pictured) said that euro zone growth may be improving but inflation remained subdued and still required substantial stimulus, tempering expectations for the central bank’s June 8 policy meeting.
German consumer prices, harmonised to compare with other European countries (HICP), rose by 1.4 percent on the year in May after inflation accelerated to 2.0 percent in the previous month, the Federal Statistics Office said.
The reading was the lowest since November and came in below the Reuters consensus forecast of 1.6 percent. The German data followed Spanish figures that consumer prices rose by 2.0 percent on the year, their slowest rate since December. The German government predicts price pressures to slow again to 1.6 percent in 2018, well below the official ECB target.
