FXStreet (Guatemala) – Carsten Brzeski, analyst at ING Bank explained that based on the results of six regional states, German headline inflation remained unchanged at 0.2% YoY in August.
Key Quotes:
“On the month, German price development was flat. Based on the harmonised European definition (HICP), and more relevant for ECB policy making, headline inflation remained unchanged and stands now at 0.1% YoY.”
“Looking ahead, the latest plunge in commodity prices should leave its marks on headline inflation in the coming months. Even a drop into negative territory cannot be excluded. Against this background, reaching the official Bundesbank projection of 0.5% annual inflation for the entire year 2015 has become highly unlikely. It would actually require headline inflation to average 0.8% in the remaining months of the year. In our view, headline inflation should stay close to but above zero for the post-summer months before gradually increasing towards 1% YoY. Consequently, these low inflation rates should continue supporting private consumption.”
“All in all, the latest plunge in commodity prices will clearly revive the good vs bad deflation debate in the EuroTower. For the time being, this should not yet lead to new policy action. However, recent comments by ECB chief economist Peter Praet confirm our view that latest market developments have rather increased than decreased chances for more QE.”
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