Energy price drops drag German inflation to 5-year low

German annual inflation rate fell to its lowest level in nearly 5 years in November, said German statistical office Destatis on Thursday, blaming low energy prices as the main downward driving force.
Compared with the same month of previous year, German consumer prices increased by 0.6 percent in November 2014, said Destatis, confirming its preliminary estimate made late last month.
The inflation rate measured by consumer price index (CPI) thus dipped to its lowest level since February 2010 after remaining stable at 0.8 percent for four months.
Destatis attributed the drop to low energy prices which fell by 2.5 percent year-on-year. Food prices, which stayed unchanged, also made a downward effect on the overall inflation rate.
When measured by harmonised index of consumer prices (HICP), European Central Bank's yardstick, German inflation fell to 0.5 percent in November from the 0.7 percent in October.
The ECB aimed to maintain the inflation rate in euro zone at "below, but close to 2 percent." Prices development in the common currency area, however, was worrisome as the inflation crept at a low level despite the Frankfurt-based central bank's efforts to conduct monetary ease by cutting interest rate and purchasing covered bonds and asset-backed securities.
Earlier data from European Union's statistical office Eurostat showed that inflation rate in the euro zone fell to 0.3 percent in November, below the 1 percent threshold under which ECB clarifies as "dangerous."
ECB insisted that the euro zone was not in deflation, a situation which would lead to a dangerous spiral where prices keep falling because consumers postpone their purchasing due to expectations that prices will drop further.
Its officials, however, suggested recently that ECB would launch more monetary ease measures in order to reverse the trend.
ECB President Mario Draghi said last week that the bank's Governing Council would reassess the monetary stimulus achieved and the outlook for price developments early next year. He said officials remained unanimous in commitment to using additional unconventional instruments within ECB's mandate.
"We have tasked our different committees ... lawyers and risk managers of the bank to work on the additional non-conventional measures if needed. That will include purchases of a broad range of assets, including perhaps sovereign bonds if needed," said Peter Praet, an ECB Executive Board member, in a speech in Washington D.C. on Tuesday.