German Inflation Misses Estimates as Pressure Mounts on ECB

Apr 29, 2014 8:44 am ET

(Updates with economist quote in fourth paragraph. For more on European debt, click here.)

April 29 (Bloomberg) -- German inflation accelerated less than economists forecast in April, increasing pressure on the European Central Bank to add stimulus in the euro area.

Inflation, calculated using a harmonized European Union method, was 1.1 percent, up from 0.9 percent in March, the Federal Statistics Office in Wiesbaden said today. Economists predicted a rate of 1.3 percent, according to the median of 21 estimates in a Bloomberg News survey. Eurostat, the EU’s statistics office in Luxembourg, will release consumer-price data for the euro area at 11 a.m. tomorrow.

ECB President Mario Draghi has signaled he’ll use unprecedented measures from negative interest rates to quantitative easing if needed to avert the risk of deflation in the 18-nation currency bloc. Inflation in the region was 0.5 percent in March, the lowest rate in more than four years and well below the ECB’s goal of just under 2 percent.

“Today’s German data are a clear downward surprise,” said Annalisa Piazza, a fixed-income strategist at Newedge Group in London. “It may not be enough to lift euro-area inflation to the expected 0.8 percent. Downside risks to our call for euro- area inflation are now clearly prevailing.”

The euro dropped after the report and traded at $1.3812 at 2:30 p.m. in Frankfurt, down 0.3 percent today. The yield on the 2-year German bund slid 11 basis points to 0.161 percent. The Stoxx Europe 600 Index was at 337.48, up 1 percent.

Consumer prices in the euro area probably rose 0.8 percent this month from a year ago, according to a separate Bloomberg survey before tomorrow’s data. Economic confidence in the bloc unexpectedly fell, while remaining near the highest level since 2011, a European Commission report showed today.

The ECB’s 24-member Governing Council gathers in Brussels next week and will announce its interest-rate decision on May 8. The Frankfurt-based central bank has kept its benchmark rate at a record low of 0.25 percent since November and the deposit rate has been at zero since July 2012.

--With assistance from Kristian Siedenburg in Vienna.