U.S. Markets

German inflation slows below ECB target in March on cheaper oil

BERLIN (Reuters) - German annual inflation slowed sharply in March to well below the European Central Bank’s target, data showed on Monday, giving the ECB additional leeway to deploy stimulus policy to counter the economic fallout from the coronavirus crisis.

German consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose by 1.3 year-on-year after posting a 1.7% increase in the previous month, the Federal Statistics Office said.

The ECB targets inflation of close to but below 2%. The reading was below a Reuters forecast for 1.4%.

A breakdown of the data showed that cheaper energy had played a role in weakening inflationary pressures. It also showed that the stockpiling of food products unleashed by the coronavirus pandemic had only a mild impact on prices.

“This is obviously due to the collapse of oil prices, which is the result of the conflicts between OPEC and Russia,” said Ralph Solveen of Commerzbank. “The coronavirus crisis has also contributed to a slump in demand.”

On the month, EU-harmonised prices rose by 0.1% in March, in line with the forecast.

The European Central Bank has ditched a cap on how many bonds it can buy from any single euro zone country, clearing the way for potentially unlimited money-printing as it scales up its response to the coronavirus outbreak.

Writing by Paul Carrel; Editing by Michelle Martin