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Carsten Brzeski, Chief Economist at ING, notes that the German inflation has dropped to 2.3% year-on-year in November, from 2.5% YoY in October, while HICP inflation came in slightly lower at 2.2% YoY, from 2.4% YoY.

Key Quotes

“Despite the sharp drop in crude oil prices, German headline inflation is still stubbornly high and has been above the ECB’s level of price stability for seven months in a row. This, however, is not a sign of underlying inflation picking up. To the contrary, some regional measures of core inflation actually dropped.”

“With today’s inflation data, 2018 will have the highest annual inflation since 2012. Looking ahead, however, once lower oil prices finally reach German households, headline inflation should fall back under the 2%-mark in the first months of 2019.”

“With crumbling and more uncertain growth prospects and very little underlying inflationary pressure in the entire eurozone, the ECB will be happy that the December meeting 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. At least one unconventional measure should be shelved now.”