The decline in German inflation in October is a relief for the doves at the ECB and shows that the central bank was right to hold off on further rate hikes, according to ING.
The bank points out that inflationary pressure has eased broadly and that there are still no signs of higher energy prices spreading to other parts of the economy. Weak demand is also limiting companies’ ability to pass higher costs on to consumers.
Despite this, ING expects inflation to rise above 3 percent around year-end and in early 2027. It may take until the end of 2027 for inflation to fall below 2 percent.
As long as the indirect effects of energy prices fail to materialize, even a rate hike in December is not a given, according to the bank.
