Germany: Headline inflation unchanged in April at 1.6% - ING

Carsten Brzeski, Chief Economist at ING, explains that based on the results of several regional states, German headline inflation remained unchanged at 1.6% YoY in April.

Key Quotes

“According to the harmonised European definition (HICP), the measure more relevant for ECB policymaking, headline inflation even slowed down to 1.4% YoY, from 1.5% in March. The Easter Bunny effect was only partly reversed.”

“Under the surface of the Easter Bunny, German inflation data still tells a two-sided story: while prices for consumer goods have gradually accelerated in recent months, inflation in services has slowed down and has even been negative for a couple of months for communication and clothing. All of this means that a significant acceleration of German inflation looks highly unlikely.”

“For the ECB, today’s German inflation data will not make life any easier. With the soft patch of the economy in the first quarter, low but also partly blurred headline inflation and a new feeling of uncomfortable caution, the decision on the nitty-gritty details of QE tapering could become complicated. While the case for an extension of QE until at least the end of the year (or even longer) is getting stronger by the day, it is now increasingly far from certain that the ECB will already be able to communicate details at the June meeting.”