German iron ore import prices down 17.3 percent in August

Meanwhile, export prices declined at a slower pace of 0.8 percent yearly in August, following a 1.2 percent climb in the preceding month.

The European Central Bank (ECB) regards annual inflation rates of close to but just under 2.0 percent as conducive to healthy economic development.

The drop in consumer prices reported by the European Union’s statistics agency Wednesday came as a surprise, since economists had expected prices to be unchanged.

At the beginning of the month, ECB’s President Mario Draghi said the central bank is ready to expand its quantitative-easing program on a weaker inflation outlook.

But the economic slowdown in China and depressed oil prices have pushed inflation expectations back down again. “The hurdle to increase the pace of purchases is likely to be high, leaving a programme extension as the path of least resistance”.

Going ahead, market participants will look forward to the release of Germany’s retail sales and unemployment rate data as well as Eurozone’s inflation data, scheduled today. Bund Yieldbund yield rose two basis points, or 0.02 percentage point, to 0.60 percent as of 10:28 a.m. London time, after falling to 0.57 percent on Tuesday, the lowest since August. 24.

According to Destatis, the weaker inflation rate reflected the continuing sharp fall in energy costs, which fell by 9.3 per cent in September after declining by 7.6 per cent in August.

Repeating his view that asset buys should only be used in an emergency, he also warned that abundant cheap credit – a side-effect of ultra loose monetary policy – is keeping unviable companies alive, posing risks to competitiveness.