✂ Fed’s first rate cut since 2020: Use our free Stock Screener to find new opportunities fastExplore for FREE

German inflation turns negative for first time since 2009

Published 29/01/2015, 14:07
© Reuters. People carry bags outside a shopping mall on the last day of Christmas shopping in Berlin

By Michelle Martin

BERLIN (Reuters) - Annual inflation in Germany turned negative in January for the first time since the height of the global financial crisis in 2009, suggesting the euro zone rate could drop further and possibly vindicating the ECB's bond-buying programme.

Preliminary data on Thursday showed consumer prices in Europe's largest economy, harmonised to compare with other European countries, dropped by 0.5 percent on the year in January after rising by 0.1 percent in December.

That undershot the consensus forecast in a Reuters poll for a 0.2 percent fall. It also falls far short of the European Central Bank's target for close to but just under 2 percent over the medium term in the euro zone.

The fall in prices was largely driven by lower energy prices, while cheaper food also had an impact.

"Although the easing price pressures are largely due to low oil prices, the ECB nonetheless views this development with concern and should feel its latest decision to announce a bond buying programme was justified," said Viola Julien, an economist at Helaba bank.

Last week the ECB announced a government bond-buying scheme to pump hundreds of billions of euros into the sagging euro zone economy, as it tries to push annual inflation in the currency union back up to its target.

Benoit Coeure, a member of the ECB's Executive Board, said the ECB's government bond-buying programme would only end once inflation was converging towards 2 percent.

Preliminary inflation data for the 19-nation euro zone is due on Friday and economists polled by Reuters before the German data was released expected it to show the cost of living in the single currency bloc dropping by 0.5 percent in January after falling by 0.2 percent in December - its first drop since 2009.

© Reuters. People carry bags outside a shopping mall on the last day of Christmas shopping in Berlin

But Marco Wagner, economist at Commerzbank, said the German data suggested the euro zone rate could slip to -0.6 percent. He added that the ECB could significantly increase the volume of government debt it buys per month in the second half of the year because inflation and growth are likely to remain weak until then.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.