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November 14, 2019

Consumer prices in Germany rose lower than expected in September

Consumer prices in GermanyConsumer prices in Germany rose lower than expected in September, while inflation remains under the European Central Bank (ECB) target. The data is backing the arguments that the central bank should gradually tighten its monetary policy. The harmonized index, which is used by the European institutions for a fair comparison with data from other Member States, rose by 1.8% year-on-year in September. The same growth was reported on a monthly basis, according to the federal statistical office Destatis.

Both figures do not meet expectations. Economists predicted growth of 1.9% yoy and an increase of 0.1% per month.

The breakdown of data shows a rise in food and energy prices against August, while service and rents remained unchanged in the ninth month of the year.

The ECB is expected to shrink its quantitative easing program in early 2018, arguing that accelerated growth provides sufficient support to the European economy in order to tighten monetary policy.

Any action on the part of the ECB is expected to be moderate and gradual as the underlying inflation excluding food and fuel is just above 1% and there are still no definite signals of upward pressure.

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