German inflation unexpectedly holds steady, backing ECB cuts
Investors and analysts see another quarter-point rate cut as almost assured at the final policy meeting of the year in two weeks
GERMAN inflation unexpectedly remained unchanged in November, backing arguments for the European Central Bank to continue lowering interest rates.
Consumer-price growth in Europe’s largest economy held at 2.4 per cent – below the 2.6 per cent median estimate in a Bloomberg survey. A moderation in food costs offset energy base effects, according to statistics agency Destatis, and may explain the undershoot.
The data contrast with figures from Spain earlier on Thursday (Nov 28) showing faster price gains. Officials nevertheless expect the eurozone as a whole to see an uptick this month. Economists polled by Bloomberg forecast a reading of 2.3 per cent after October’s 2 per cent, which matched the ECB’s goal.
Investors and analysts see another quarter-point rate cut as almost assured at the final policy meeting of the year in two weeks’ time. Beyond that, some ECB officials want reductions at every meeting until the deposit rate hits 2 per cent. Others are more cautious.
Speaking this week to Bloomberg, Executive Board member Isabel Schnabel highlighted sticky price pressures in the services sector, as well as still-acute geopolitical risks.
Borrowing costs can be lowered “gradually” to the so-called neutral level that neither stimulates not restricts economic expansion, she said, while warning against going too far for fear of squandering valuable policy space.
In Germany, the Bundesbank expects unfavourable annual comparisons to keep inflation “temporarily somewhat higher” into year-end and in early 2025. But it’s likely to edge lower again by the spring. BLOOMBERG
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