German inflation grinds lower in May 2020

FRANKFURT AM MAIN, Germany – Inflation in Europe’s top economy Germany slowed further in May, official data showed Thursday, May 28, a week ahead of a European Central Bank (ECB) meeting that could decide on further economic stimulus.

Price growth was just 0.6% year-on-year, federal statistics authority Destatis said in a preliminary reading, in line with forecasts from analysts and down from 0.9% in April.

In February, before the coronavirus pandemic, German inflation was running at 1.7%.

Prices for the goods tracked in the basket fell slightly this month, a breakdown showed, driven by an 8.5% drop in energy costs after last month’s oil price crash.

Meanwhile the pace of food inflation remained elevated compared with the pre-pandemic period.

Overall price growth reached just 0.5% when measured using the Harmonized Index of Consumer Prices (HICP), the ECB’s preferred inflation yardstick.

That could encourage monetary policymakers next week to expand an unprecedented 750-billion-euro ($826 billion) bond-buying program launched to cushion the impact of the pandemic.

Falling inflation in Germany will drag price growth across the 19-nation eurozone away from the ECB’s just-below 2% target across the currency bloc.

The Frankfurt institution’s massive economic interventions are ultimately designed to stoke growth and in turn power inflation towards its target. – Rappler.com