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Slight Pick Up In German Inflation

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Slight Pick Up In German Inflation

A major update to the European inflationary situation has just been provided by the German Department of Statistics in the form of preliminary Consumer Price Index (CPI) and Harmonized Index of Consumer Prices (HICP) data releases for the Eurozones largest economy.

The CPI for the month of April has come in at 1.3% year on year, up on the March reading of 1.0% and slightly missing the projected figure of 1.4%. The month on month reading is -0.2%, this is lower than the previous 0.3%, expectations here were in fact for a contraction in consumer prices of -0.1%.

The European Central Bank (ECB) relies on the HICP reading for it’s economic deliberations. These figures are naturally reflective of the CPI numbers. The April HICP reading for Germany has come in at 1.1% year on year, this is also up on the March statistic of 0.9%, again this has missed the consensus estimate of 1.3%. Month on month the HICP reading shows a 0.3% fall in consumer prices, this is lower than the prior reading of 0.3%, similar to the CPI’s the market held a -0.1% expectation going into this data release.

The Governing Council of the ECB is meeting in Belgium on the 8th May for it’s next scheduled monetary policy deliberation. Although the market is not yet privy to the overall Eurozone HICP readings, the ECB has stated that should these inflation numbers continue to fall then ‘unorthodox’ monetary policy measures will be take, this is being interpreted as the introduction of a form of quantitative easing.

Significant nervousness however exists around this meeting, the ECB President, Mario Draghi, has noted that should inflation remain flat this month or indeed rise then the Bank will refrain from any monetary action. Markets have already taken a leap of faith in supporting the Bank’s wait and see policy and at this stage patience is beginning to wear thin, a further lack of action in light of anything short of a significant rise in inflation will spell trouble for European markets.

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