Provisional statistics released on Friday indicated that annual inflation in the largest economy in Europe remained constant in November, which could influence discussions at the European Central Bank about whether to further lower interest rates.
According to the federal statistics bureau Destatis, prices increased by 2.3 percent in November compared to the same month last year, but core inflation, which excludes volatile food and energy prices, increased by 2.7 percent.
The rate of price hikes increased from 2.3 percent in October to 2.6 percent on the “harmonised” metric that the ECB prefers.
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.
However, other experts anticipate that the ECB will soon begin lowering rates due to slowing wage growth and a muted eurozone economy. This expectation is less plausible if inflation turns out to be sticky in the largest economy in the eurozone.
“Today’s inflation data will hardly have any impact on the ECB’s meeting in December,” stated Carsten Brzeski, economist at the Dutch bank ING. However, he added, “If anything, it strengthens the point of those at the ECB arguing against additional rate cuts.”
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