German Inflation Slows in December as ECB Moves to Curb Stimulus

(Bloomberg) -- German inflation slowed in December, underscoring the challenge the European Central Bank will face next year as it gradually removes its stimulus program.

Consumer prices rose an annual 1.6 percent, the Federal Statistics Office said on Friday. While that’s slower than November’s 1.8 percent, it’s above the 1.4 percent median forecast in a Bloomberg survey of economists.

Inflation has remained tepid in Germany even as record-low unemployment bolsters private consumption and a recovery in global trade fuels exports and investment. The Bundesbank this month lifted its projections for growth in Europe’s largest economy through 2019 and said it expects momentum to remain strong over the coming year. It sees inflation accelerating to 1.9 percent in 2020.

The German number comes a week before data for the euro area, where consumer-price gains are expected to slow to an annual rate of 1.4 percent. The ECB has already warned that inflation will slow temporarily in the coming months before accelerating again later in 2018.

Earlier this month, President Mario Draghi stopped short of declaring that the inflation goal will be met in 2020, although he expects underlying price pressures to rise gradually over the medium term as the euro-area economy enjoys its best growth in a decade. The ECB will next month halve its monthly pace of asset purchases to 30 billion euros ($36 billion) and continue buying until at least September.

--With assistance from Kristian Siedenburg and Andre Tartar

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net.

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, David Goodman

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