Yesterday euro inflation surprised on the downside as it declined to 0.7% in October from1.1% in September. This is much lower than the ECB’s target of maintaining inflationbelow, but close to, 2% over the medium term. Based on this, we expect the ECB to cutthe refi rate by 25bp in December and to signal this at the meeting next week. A strongindication of a future rate cut would remove some of the pressure on Mario Draghi duringthe press conference where a lot of attention will be on the very low inflation rate.
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Danske Bank