Sunday, 21 July 2019

German inflation moves closer to ECB target

BERLIN: German annual inflation accelerated to 1.5% in June but remained below the European Central Bank’s target, final data from the Federal Statistics Office showed.

The reading for German consumer prices – harmonised to make it comparable with inflation data from other European Union countries – was revised up after preliminary data released at the end of June had shown prices increased by 1.3% year-on-year.

The ECB targets inflation of close to but below 2% for the euro zone as a whole.

Inflation in the euro zone has long been below the ECB’s target and the European Commission on Wednesday lowered its estimates for euro zone growth and inflation, saying uncertainty over U.S. trade policy posed a major risk to the bloc.

The ECB will next meet on July 25 and investors are split on whether the bank will pull the trigger on stimulus then or wait until its Sept. 12 meeting.

ECB Governing Council member Olli Rehn has said that if the ECB wants to fulfil its mandate, further monetary stimulus is now needed until the economy and inflation prospects improve.

A detailed breakdown of non-harmonised inflation data showed the cost of package holidays increased strongly.

The final data showed EU-harmonised prices rose by 0.3% on the month – revised up from 0.1%.

Now its 10th year of expansion, the German economy returned to growth between January and March, posting a 0.4% expansion, but the Bundesbank expects a small contraction in the second quarter. Activity in the manufacturing sector is already shrinking.

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