ECB to ease monetary policy in December

Euro area headline inflation stood slightly to the downside in October whereas, core prices of the economy rose more than the expectation. At the non-core level, energy inflation remains weak, while food prices continue to rise led by the unprocessed food component. 

At the core level, both non-energy industrial goods (NEIG) and services prices increased by 0.1pp, leading the unexpected 0.1pp rise in core inflation.

"Given that headline inflation remains poor, risks of negative spillovers on core prices remain elevated. The headline HICP inflation expected to average +0.1% this year (core: +0.8%) and +1.0% next (core: +1.0%). As a result, the ECB is expected to ease monetary policy further in December by (at least) extending the current PSPP to beyond 2016", argues Barclays. 

Analysts suggest taking bold steps, including a cut to the repo rate, should not be ruled out completely, although they are unlikely to be delivered in December.