German CPI should fall if oil price remains steady
The drop would be crucial to ease German impatience with the ECB as Germany prepares for elections in September
If oil prices hold steady around present levels, German consumer price inflation should fall to about 1.3% in December from 2% last month. Year-on-year change in the German consumer price index follows YOY change in the oil price. If oil doesn’t move much, the inflation rate should fall. That’s a point of great political importance as Germany gears up for national elections in September. If inflation were to stay around the 2% mark, German patience with the European Central Bank’s negative interest rates would disappear. If inflation falls, Germany will give the ECB a longer leash.