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German CPI unchanged at 0.8% YoY in October - ING

FXStreet (Łódź) - Carsten Brzeski from ING comments on the German inflation numbers released today and showing that headline CPI remained unchanged at 0.8% YoY in October.

Key quotes

"On the month, German prices dropped by 0.3%, from 0% in September. Based on the harmonised European definition (HICP), and more relevant for ECB policy making, headline inflation decreased to 0.7%, from 0.8% in September."

"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. The phasing out of the negative impact on inflation from last year’s abolishment of tuition fees in Bavaria did not offset the energy-related downward trend."

"Looking ahead, the recent drop in energy prices – if sustained and if not offset by strong currency weakening – could push German headline inflation further down. At the current juncture, price expectations of both consumers and producers remain solidly anchored in Germany. Therefore, even a further drop in headline inflation and/or dropping prices in some sectors are no reason to fear deflation."

"For next week’s ECB meeting, today’s German inflation data should not be decisive. The latest series of better-than-feared economic data for the Eurozone, the tender positive signals from the latest Bank Lending Survey and a growth-supportive package of lower energy prices and a weaker euro exchange rate should allow the ECB to wait at least until the December meeting before possibly deciding on new action. German inflation data and possible further drops in Eurozone inflation, however, will keep the pressure on the ECB to do more high up."

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