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ECB to Remain Broadly Accommodative in H1 of 2021, Even if Inflation Jumps
Inflation has been weak in the Eurozone for a long time, and it turned negative in September last year, and has been declining since then. But, inflation turned positive in Germany in December, growing by 0.5%, while today’s report showed a 0.8% increase for January. The European Central Bank commented on the monetary policy later on, but they won’t think about tightening until at least Q2 of this year.
Germany January Final CPI Report
- January final CPI +1.0% vs +1.0% y/y prelim
- CPI +0.8% vs +0.8% m/m prelim
- HICP +1.6% vs +1.6% y/y prelim
- HICP +1.4% vs +1.4% m/m prelim
There has been no change to the initial estimates, as German inflation bounced back last month. However, as mentioned before, this is largely due to special factors with the VAT cut expiring and the introduction of a new CO2 tax this year. We expect the ECB to continue brushing aside any jumps in inflation during H1 of 2021.
Comments by ECB policymaker, Pablo Hernandez de Cos
- ECB prepared to adjust all instruments as needed, in order to reach inflation target
- Euro area economic recovery is fragile, faces downside risks
- This is due to uncertainty surrounding evolution of the pandemic
- Ample monetary stimulus continues to be essential
This isn’t anything out of the ordinary, but at least there’s no specific mention of the euro exchange rate in the latest bunch of remarks here, so that’s something.
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