FXStreet (Delhi) – Carsten Brzeski, Chief Economist at ING, suggests that based on the results of five regional states, German headline inflation slowed down in December to 0.3% YoY, from 0.4% in November. Key Quotes “On the month, German prices dropped by 0.1%. Based on the harmonised European definition (HICP), and more relevant for ECB policy making, headline inflation dropped to 0.2% YoY, from 0.3% in December. With these December data, the year 2015 marks the lowest average annual inflation rate in Germany since the start of the monetary union. Looking at the available components at the regional levels shows that the drop in headline inflation was not only driven by lower energy prices but also some tentative second-round effects on consumer goods and probably first discounts in the Christmas sale season. Looking ahead, it should take at least until the second half of the year before German headline inflation at least crosses the 1%-threshold again. With the continued slump in energy prices, further second-round effects on other goods and only little pricing power from retailers and producer, it is hard to see a strong acceleration of German inflation any time soon. Even the strong labour market and latest wage increases have done little to push up – at least – core inflation. All of this means that German consumers are currently enjoying the best of both worlds: a strong labour market with decent wage increases and low inflation – the perfect combination for an improvement of German consumers’ purchasing power and hence private consumption. Looking at other déjà-vus at the start of the New Year, like new tensions in the Middle-East, tumbling Chinese stock markets and new problems with structural reforms in Greece, at least German inflation data yesterday provided one comforting and positive signal for 2016.” For more information, read our latest forex news.