German inflation falls further below ECB target, chances of October rate cut rise
German inflation fell further below the ECB’s 2% target in September, adding pressure on the central bank to cut rates in succession at its October meeting. The German statistics office said on Monday that consumer prices rose 1.6% year-on-year in September, down from 1.9% in August and the lowest since February 2021. The reading was slightly below economists’ expectations of 1.7%. The German data also followed a faster-than-expected cooling of inflation in France and Spain, raising the prospect of an October 17 rate cut by the ECB. In early September, the ECB cut its main deposit rate to 3.5%. While the fall in September was largely due to lower energy prices, inflation in the services sector, which is closely watched by ECB policymakers, also edged down to 3.8% from 3.9% in August. Given the fragile position of the German economy, which already shrank in the second quarter of this year and continued sluggish manufacturing, an ECB rate cut could also help stimulate much-needed economic activity.
