"If anything, we see disinflationary pressures to prevail in the remainder of the year as the [euro-zone] recovery is still very fragile"
- Annalisa Piazza, Newedge economist
Consumer prices in Europe's powerhouse, Germany, advanced in line with analysts' forecasts, reflecting subdued inflationary pressure and underscoring fragile recovery. As initially reported in late September, consumer prices remained unchanged from the previous month, while advanced 1.4%, after a 1.5% gain in August. Electricity prices jumped markedly over the corresponding period compared to a year ago, increasing 11.5%, while heating oil and fuel prices fell 5.8% and 6.7% respectively, causing whole transport costs to push the overall CPI lower by 1.2%. Inflation stabilized around current levels in September, and even despite signs of improvement, leading indicator of economic health struggles to move closer to the 2% target level.
The Eurozone economy is gradually recovering even though there are still major problems that needed to be solved; however, Mario Draghi backed policymakers' decision to keep borrowing costs low for as long as it is needed, as guidance allows making another rate cut if market volatility resumes. After Fed's hint of a possible withdrawal of its stimulus programme, market rates have risen significantly, raising concerns they can derail economic recovery. The overnight rate stood at 0.24% on Friday, while it was below 0.1% during May and in June it hit 0.37% before the announcement of forward guidance by the ECB.
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