Sliding German inflation seen ahead of central bank decision

GERMAN inflation plunged in May, dropping to just 0.6 per cent from the same month in 2013, a reduction of nearly half from the figure that was recorded in April.

The country’s harmonised index of prices was expected to fall, but only to one per cent.

“At this stage, it seems likely that part of this downward surprise will be reverted next month,” said BNP Paribas economist Evelyn Herrmann.

“However, it is unlikely that the full downward surprise will be recovered. German inflation is therefore likely to remain lower than we initially expected over coming months.”

She added that with low inflation in other economies, price growth could be as low as 0.5 per cent for the Eurozone in May.

The low figure recorded is seen by many observers as another signal that the European Central Bank (ECB) will cut interest rates this month.