German consumer price inflation stays flat, well below the central bank’s target

Germany’s consumer price inflation remained steady in June, although well below the European Central Bank’s targeted rate of inflation of 2 percent. The price growth supports central bank expectations that German and therefore, eurozone inflation will pick up after low, or falling prices, in the early months.

The consumer price index calculated according to harmonized European standards, or HICP, increased by 0.1 percent on the month and rose by 0.2 percent on the year, data released by the federal statistics office Destatis showed Tuesday, confirming the first estimate it published on June 29.

Consumer prices calculated according to national standards rose by 0.1 percent on the month and by 0.3 percent y/y, Destatis said, also confirming its first estimate. The statistics office added that energy prices continued to exert downward pressure on the headline figures, falling by 6.4 percent on the year in June, compared with a 7.9 percent fall in May.

Further, food and beverages prices increased by 0.1 percent y/y, buoyed by vegetable prices, which rose 4.6 percent including potatoes, which went up by 19.1 percent. Also, separate wholesale price data released by the Federal Statistical Office on Tuesday showed an annual decline of 1.5 percent, a significantly narrower drop than that in May and April, with prices moving higher than the anticipated value of 0.6 percent m/m.

Meanwhile, the low rate of inflation may possibly induce the ECB to continue injecting monetary stimulus into the economy through its quantitative easing program, and may also administer for a policy easing in the near term if the situation worsens.