On Tuesday, preliminary data released by Germany's Federal Statistical Office showed that the year-on-year CPI growth in Germany, the largest economy in the European Union (EU), fell to 10% year-on-year in November from 10.4% in the previous month, below market expectations of 10.4%.
The increase was due to rising food and energy costs, which have risen sharply since the beginning of the Russian-Ukrainian conflict, with a significant impact on inflation, according to the statistics bureau.
The larger-than-expected slowdown in the German (GER) CPI provides greater possibilities for the ECB to slow down the pace of interest rate hikes.
On Tuesday, preliminary data released by Germany's Federal Statistical Office showed that the year-on-year CPI growth in Germany, the largest economy in the European Union (EU), fell to 10% year-on-year in November from 10.4% in the previous month, below market expectations of 10.4%.
On a month-on-month basis, the CPI slowed by 0.5% month-on-month in November, compared with a 0.9% increase in the previous month, the lowest since November 2020.
Meanwhile, the European Central Bank's (ECB) preferred inflation measure, Germany's November-Harmonized CPI, rose 11.3% year-on-year in line with expectations, slowing slightly from 11.6% in the previous month.
The increase was due to rising food and energy costs, which have risen sharply since the beginning of the Russian-Ukrainian conflict, with a significant impact on inflation, according to the statistics office.
After the release of the data, there was no significant reaction from the market, and the euro traded at 1.0358 against the dollar.
Georg Kramer, chief economist at Commerz Bank, said: "It is too early to say that everything is clear, as many utilities have already announced a sharp increase in electricity and gas prices in January. Inflation slowed in November only because the price of fuel and heating oil has come down. ”
In Spain, inflation fell for the fourth consecutive month, falling more than expected, due to falling electricity and fuel costs. Meanwhile, overall inflation in Belgium fell to 10.6%.
Inflation data for 19 euro zone countries will be released on Wednesday, and economists expect a slight slowdown for the first time in a year and a half. This inflation figure will be crucial as ECB officials weigh a third consecutive 75 basis point hike or a small 50 basis point hike before a recession.
For now, some officials are already in favor of slowing the pace of rate hikes in December, and their voices could be louder if the rally is fading.
Now their position has completely changed. Multiple former bulls now say that the era of a stronger dollar is coming to an end.
The November FOMC minutes and dovish speeches by Fed officials also led to more confidence that the Fed's policy exceptions are waning. Overnight index swaps show that expectations for the Fed's peak interest rate have fallen below 5.00%.
