German Inflation Falls Hinting European Deflation

Inflation in Germany fell to its lowest level in more than five years in December, official figures have shown.

Germany’s federal statistics office Destatis, said the annual rate of inflation fell to 0.2% in December from 0.6% a month earlier.

That was its lowest level since October 2009.

It comes two days before eurozone inflation figures for December, which some analysts believe will show the currency bloc falling into deflation.

Inflation in the 18-nation currency bloc in November stood at 0.3% according to the European Union’s statistics agency, Eurostat.

It has been below the Bank’s target of 2%, or just below, since the start of 2013.

A number of other eurozone countries, including Spain and Italy, have already fallen into deflation.

Using the European Central Bank’s (ECB) preferred statistical calculations – the Harmonised Index of Consumer Prices (HICP) – German inflation was even lower at 0.1% in December.

The latest figures will increase pressure on the ECB to begin buying government debt.

After the ECB’s December meeting left interest rates unchanged at 0.05%, the bank’s president, Mario Draghi, said it had “stepped up” its preparations to act if needed, and help prop up inflation in the eurozone.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza