German Inflation Falls More Than Expected to 2.8%

October inflation in Germany cooled more than expected, according to preliminary Federal Statistical Office data, dropping the annual rate to 2.8 percent from 3.3 percent in September. Consumer prices fell 0.2 percent on the month after a 0.6 percent rise. Core inflation declined to 2.1 percent from 2.4 percent, and the EU-harmonized HICP, distinct from the national CPI, also eased to 2.8 percent year over year. The government reintroduced a fuel tax discount from October 1, cutting energy tax by about 14 cents per liter and total pump costs by up to 17 cents including VAT. Fuel and household energy prices still rose 12.2 percent year on year, slower than nearly 15 percent in September. Food was up 0.4 percent and services 2.5 percent. Commerzbank's Jörg Krämer said the drop below 3 percent was primarily due to the gas tax rebate and that inflation will likely climb above 3 percent again around the turn of the year. The Bundesbank said energy prices are likely to remain very high despite the temporary rebate. Dana Whitfield welcomed the faster-than-forecast ease but said energy could still force another ECB hike. The ECB held its deposit rate at 2.5 percent; Christine Lagarde said she will step down in February, nine months early. Eurozone inflation had hit 3.8 percent in September, a three-year high.