German inflation drops below zero in February, state data suggest
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Loading... - Patrick Phelps
- 26 Feb 2020
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German inflation turned negative in February for the first time in five months, preliminary state data indicated on Friday, giving proponents of further monetary policy easing more ammunition for a European Central Bank meeting next month.
Consumer prices fell below zero on the year in five German states, the data showed. In the most populous state North Rhine-Westphalia, annual inflation slowed to 0.1 percent from 0.6 percent in January.
The state readings will feed into nationwide inflation data due at 1300 GMT.
Capital Economics analyst Jessica Hinds said the state data suggested that pan-German EU-harmonised consumer price inflation (HICP) dropped to -0.1 percent from +0.4 percent in January.
This would be below the Reuters consensus forecast of economists who predicted a decline to zero in February. The last time Germany 's HICP inflation turned negative was in September 2015 with a reading of -0.1 percent.
For the euro zone, economists polled by Reuters expect the February inflation rate, due out on Monday, to have fallen to 0.1 percent from 0.3 percent in January.
However, inflation data from France and Spain, also released on Friday, showed that price pressures have weakened in other euro zone countries as well.
"All in all, it now seems likely that euro-zone inflation fell back below zero in February," Hinds said.
"While the drag from energy should fade later in the year, with core inflation persistently weak and inflation expectations still falling, the ECB can't afford to disappoint expectations again in March."
The ECB is widely expected to cut its deposit rate by 10 basis points to -0.4 percent on March 10 and economists polled by Reuters say the size of the bond-buying scheme could be extended by 10-30 billion euros a month. Its monthly asset purchases are currently at 60 billion euros.
