- Bundesbank
Almost two weeks after releasing updated inflation and growth outlook, the German Bundesbank said the Brent crude prices had since plummeted 11% on average below the forecast estimates. Consequently, the central bank admitted it would have to revise downwards its 2015 inflation forecast if recent drops in oil prices persist. Currently, the Bundesbank expects inflation of 1.1% next year, while the November HICP reading for Germany came in at 0.6%, the lowest reading since February 2010.
The Bundesbank has, in what is considered as an unexpected move, supported the European Central Bank's view on taking further stimulus measures to bolster the Euro zone economy if needed, though the German central bank did not openly back up the ECB's quantitative easing. The German central bank's language surprised analysts, as Bundesbank Chief Jens Weidmann had previously reiterated the need of more reforms in Euro zone countries as the main tool for fuelling growth and has been reluctant to endorse quantitative easing. ECB policymakers are debating whether to take fresh action to combat the threat of deflation in the Euro zone, where inflation is running at 0.3%, markedly below the ECB's target of just under 2%. Analysts are worried that falling oil prices could send the Euro zone into a deflationary spiral, forcing the ECB to buy sovereign debt early next year.
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