Annual German inflation stable at 2.3pc in November

AFP :

Annual inflation in Europe’s top economy was unchanged in November, provisional data showed Friday, potentially playing into debates at the European Central Bank over whether to further cut interest rates.

Prices rose 2.3 percent in November compared with the same month last year, federal statistics office Destatis said, but core inflation — which strips out volatile food and energy prices — was up 2.7 percent on the year.

Under the “harmonised” metric favoured by the ECB, the pace of price increases quickened somewhat to 2.6 percent, up from 2.3 percent in October.

Services inflation — closely watched by the central bank since it is heavily influenced by wage growth — meanwhile stayed at the elevated rate of 3.5 percent.

“Monetary policymakers are unlikely to be pleased with the persistent 3.5 percent inflation in service prices,” Deutsche Bank economist Sebastian Becker said.

“The core inflation rate, which is important for the ECB and better reflects underlying price pressure than the headline inflation rate, remains well above the two percent mark,” he added.
After two years of cutting rates, the ECB has left them unchanged at its past three meetings as inflation has fallen from a high of 10.6 percent in 2022 to settle around the central bank’s two-percent target.

But slowing wage growth and a subdued eurozone economy have led some observers to expect the ECB to soon start cutting rates, a move that becomes less likely if inflation proves sticky in the eurozone’s largest economy.

Carsten Brzeski, economist at Dutch bank ING, said “today’s inflation data will hardly have any impact on the ECB’s meeting in December” but added: “If anything, it strengthens the point of those at the ECB arguing against additional rate cuts.”