Capital Economics: German and Spanish inflation data provide room for the European Central Bank to accelerate interest rate cuts

Andrew Kenningham, an economist at Capital Economics, said in a note that German and Spanish inflation data, which held at 2.4 per cent in November while Spanish inflation climbed to 2.4 per cent from 1.8 per cent in October, meant that the ECB was likely to accelerate the pace of interest rate cuts in December. Kenningham said the data so far suggested that Capital Economics' expectations that eurozone inflation would rise to 2.2 per cent in November from 2.0 per cent in October were too high. He added that given that the risk of a resurgence in inflation was decreasing and the risk of secular stagnation in economic growth was increasing, this provided a strong reason for the ECB to accelerate the pace of interest rate cuts in December, raising its expectation of a rate cut from 25 basis points to 50 basis points.