Looking forward, ING expects inflationary pressures to continue as energy base effects fade and wages rise, potentially signaling a broader wage shift if unions shift from high demands to job security. With eurozone GDP growth outpacing ECB projections in Q3 and German inflation rising, some ECB officials may question the October rate cut and the push for even larger cuts. ING suggests the recent data point to a more data-driven rather than dependency-driven approach to rate cuts, with hawkish members likely to resist further easing unless macroeconomic conditions strongly warrant it.
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Germany's Inflation Quickens, Pausing ECB
Germany’s October inflation surge may have some ECB members reconsidering recent rate cuts and the openness to more aggressive measures, according to ING. Headline inflation in Germany jumped to 2.0% year-on-year, from 1.6% in September, while the EU inflation measure increased to 2.4% from 1.8%. The monthly 0.4% uptick shows persistent inflation pressures driven by rising energy costs, goods, and food prices. Service inflation, closely monitored by the ECB, also reaccelerated to nearly 4%, adding to concerns.
