German consumer inflation eased more than expected in May to fall well below the European Central Bank's 2 percent target. And as Kate King reports that's taking some pressure off the ECB to wind down its monetary stimulus in the near term.
German Chancellor Angela Merkel pulling out all the stops as she tries to drum up business with India. But it's the domestic market which has diverted from the song sheet. Despite the country's booming labour market, consumer inflation slowed more than expected in May Dropping well below the ECB's target of 2 percent and giving more substance to Mario Draghi's aggressive stimulus plan. SOUNDBITE (English) JUSTIN URQUHART STEWART, HEAD OF CORPORATE DEVELOPMENT, SEVEN INVESTMENT MANAGEMENT, SAYING: "I think very good chance that Draghi will carry on with it for the time being. The message is is quite clear I think we will do everything that is necessary to make sure that this recovery is well rooted and well bedded and therefore giving the market the clear view that actually they should have confidence and not be worried about it." Spain also reported easing inflation. Together, the two suggest that inflation rate for the entire euro zone, due on Wednesday, will have fallen. As Europe's economic powerhouse, Germany has been pressuring the ECB to relax its quantitative easing programme saying it's not a one fits all policy. And with record employment it's easy to see why - but that should mean inflation would be pushed up. Tuesday's figures show food costs rose more sharply, while a fall in oil prices saw energy inflation slow On Sunday Merkel raised eyebrows when she said Europe must take its fate into its own hands, implying that the U.S and post- Brexit Britain were no longer reliable partners. But the latest data is yet another reminder that Germany's current upswing is taking place without inflationary pressure.