German prices below target as Merkel rules out fiscal stimulus

Chris Papadopoullos
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German chancellor Angela Merkel this week said Germany would run a balanced budget
INFLATION in Germany remained steady in September, but was still undershooting the European Central Bank’s target.

Prices rose by 0.8 per cent year-on-year in September, according to figures released by Germany’s Federal Statistics Office yesterday.

The year-on-year figure has been the same for the three months, marking a brief pause in a longer term trend of falling inflation rates that started roughly two years ago.

The weak figure may persuade some German policy makers that fiscal and monetary easing is not such a bad idea.

Leading figures such as Mario Draghi, president of the European Central Bank, and Christine Lagarde, head of the International Monetary Fund, have called on the Eurozone’s largest economy to spend more.

German chancellor Angela Merkel rebuffed the demands by insisting a balanced budget would be run next year.

Germany has also been critical of bond purchases by the central bank and is currently challenging the legality of such a programme launched in 2012.

Low inflation is becoming a major concern in the Eurozone with many economists worried it could be about to repeat Japan’s lost decade in the 1990s.