German March HICP inflation was confirmed at 0.4% y/y and the national CPI rate at 0.5% y/y, with prices down 0.2% m/m and 0.1% m/m respectively. No surprise in the data and the breakdown, which was available for the first time confirmed that lower energy prices were once again a key factor behind the decline in the headline rate to a near 10 year low, with prices for heating oil down 7.5% m/m and 36.3% y/y. Petrol prices were down 18.0% y/y in March. Base effects from energy prices will continue to bring the headline rate down and we are likely to see negative inflation rates in the middle of the year. However, base effects will then push inflation higher later in the year and for now we agree with the ECB that the risk of full blown deflation is limited.