Inflation in Germany eased unexpectedly in November, according to preliminary figures today, giving the European Central Bank (ECB) latitude to ease interest rates next week. Preliminary consumer price data from the six key German states indicates that inflation in dropped by 0.4pc in November from last month, leaving the annual rate at 1.1pc. That is down from 1.3pc in October and compares to forecasts for an increase in the annual rate.
The decline in inflation in the eurozone's largest state will help to ease the overall consumer price index in the 12 nations, which will help to ease the concern of the inflation-conscious central bank. "In any case, the ECB has signalled that it is looking beyond short term moves in inflation to the outlook further out," said Michael Crowley, economist at Bank of Ireland Treasury and International Banking. "In this regard, the bank believes that the medium term prospects for inflation have improved, hence the market expectation that it will cut rates next month." The ECB believes the medium term prospects have improved due to the rise in the value of the euro and the weaker than expected outlook for economic growth. //www.fxcentre.com