German inflation slowed in December as Europe’s sovereign debt crisis damped economic growth.
The inflation rate, calculated using a harmonised European Union method, fell to 2.4 per cent from 2.8 per cent in November, the Federal Statistics Office in Wiesbaden said on Thursday. That’s in line with the median forecast of 18 economists in a Bloomberg News survey.
The 17-member euro region faces recession as cash-strapped governments cut spending to contain the debt crisis. The European Central Bank lowered its benchmark interest rate for a second straight month in December, saying economic activity is subdued and price pressures will ease. “The weakening economy is the main driving force behind falling inflation rates,” said Marina Luetje, an economist at Dekabank in Frankfurt. “German and euro region inflation will fall to 1.7 per cent in 2013.”
Euro-area inflation will slow to 2.8 per cent this month from three per cent in November, according to the median of 24 estimates in another Bloomberg survey. That report is due on January 4.
“Cost, wage and price pressures in the euro area should remain modest over the policy-relevant horizon,” the ECB said December 15 in its monthly bulletin. “Inflation is likely to stay above two per cent for several months to come, before declining to below two per cent,” the bank’s inflation ceiling, it said.
