The flash estimate for the consumer price trend in October revealed an inflation rate of 2.2 percent. It was thus 0.1 percentage points higher than in the prior month and has now for the fifth consecutive month been above the European Central Bank target of close to, but less than 2 percent. This will hardly persuade it to change the thrust of its monetary policy. After all, a large part of the price boost is attributable to external factors that the ECB can hardly influence.
Indeed, the lion’s share of the comparatively high level of inflation continues to be attributable to energy price trends. Here, prices again really surged. Small wonder, since the price of crude oil in October was, despite the most recent decreases at the end of the month, on average still around USD 80 and thus almost 40 percent up on the year. However, industrial goods and services also rose more strongly than in prior months. On balance, core inflation, meaning the figure for consumer prices excluding energy and unprocessed foods, also climbed, namely from 1.1 to 1.3 percent.
At the country level, the inflation rate rose in Germany and in Italy, where it climbed to 2.4 and 1.7 percent respectively. In France and Spain it remained on a par with the previous month, meaning at 2.5 and 2.3 percent respectively.
Today’s data releases fit our forecast. Primarily driven by domestic market effects, the price trend for industrial goods and services remains modest despite the recent increases. Energy prices are still mainly responsible for stoking inflation. As long as core inflation does not make any larger or more prolonged leaps or bounds, the ECB’s willingness to act and depart from its monetary policy course is likely to remain limited.