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Carsten Brzeski, Chief Economist at ING, points out that based on the results of seven states, Germany’s headline inflation came in at 2.5% YoY in October, from 2.3% YoY in September.

Key Quotes

“HICP inflation came in at 2.4%, from 2.2% YoY. Headline inflation reached a ten-year high.”

“While headline inflation has now been on a gradual increase since the start of the year and has been above levels the ECB defines as price stability for six months in a row, available components still should little signs of a pick-up in underlying inflation. In fact, the increase in headline inflation seems to be mainly driven by higher oil prices and the vacation-driven effect of higher prices for hotels and packaged holiday trips.”

“With crumbling and more uncertain growth prospects, new political developments and very little underlying inflationary pressure, the ECB will be happy that December is not too far away and that it can bring net QE purchases to an end before discussions about an extension could flare up again. Against the background of recent developments, however, next year’s discussions on the timing of the first rate hike will be fervid.”