German April CPI inflation was confirmed at 0.0% m/m and 0.7% y/y, up from 0.5% y/y in the previous month. Heating oil and petrol prices rose over the month, and the base effects in the annual comparison was less positive than last month. On the other hand gas prices dropped sharply over the month. Energy prices aside, the later timing of Easter this year also had an effect, with holiday related jumping higher in the annual comparison. With gas prices now following oil lower, the annual rate for overall household energy has turned negative for the first time, and prices dropped 0.1% y/y, compared to a rise of 13.8% y/y at the peak in October last year. Excluding household energy and petrol prices are up 1.4% y/y, nearly double the headline rate, but still firmly below the ECB’s 2% limit for price stability. The headline rate is likely to dip below zero later in the year, but with base effects likely to turn negative again, this should be a temporary decline and we agree with the ECB that the risk of lasting deflation is contained for now, even though officials need to keep a close eye on inflation expectations.