In Germany, CPI inflation dropped by 0.6% M/M in January, while the market ex-pectations were looking for a decline of 0.4% M/M. On a yearly basis, inflation fell to 0.9% Y/Y from 1.1% Y/Y in the month before. In the near-term, inflation is expected to extend its downward trend. The sharper than expected drop raises expectations that also euro zone CPI might come out below the consensus estimate of 1.4% Y/Y, which will be the lowest level since 1999. The report confirms that the downtrend in inflation is still steeper than the market discounts.