Germany: Weaker inflation supports case for ECB action – ING
Carsten Brzeski, chief economist at ING, notes that the German headline inflation came in at 1.0% year-on-year in August, from 1.1% in July, while the national inflation measure dropped to 1.4% YoY, from 1.7% in July.
Key Quotes
“This year’s strong discrepancy between the national and the European measure of German inflation is mainly caused by methodological changes to the measurement of package holidays in the European measure and changes to the weights of different components in the national measure.”
“Looking ahead, lower oil prices will keep German headline inflation hovering around 1% in the coming months. While this is good news for consumers, who as Mario Draghi once said can “buy more stuff”, the low inflation combined with the prospects of an at best stagnating economy bolsters the case for new monetary stimulus from the ECB in two weeks from today.”
“In our view, the ECB will present a new stimulus package consisting of a 20bp cut in the deposit rate, a tiering system, a restart of QE with 30bn euro per month as well as a repricing of the TLTROs.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
