German Inflation Rate Unchanged As Hopes Grow For Rate Cuts

Official data indicated Monday that German inflation remained constant in April, remaining at a three-year low as expectations increase that the European Central Bank would soon begin slashing interest rates.

Consumer prices in Europe’s largest economy rose 2.2 percent from a year ago, according to preliminary data from the federal statistics agency Destatis.

It was the same rate as in March and the lowest since April 2021.

Closely watched core inflation, which includes volatile energy and food costs, fell to 3% from 3.3% in March.

Ulrich Kater, an analyst at DekaBank, stated that the “further easing of the core inflation rate clears the way for the ECB to cut interest rates in June” at its next meeting.

However, he warned that authorities must remain cautious against vulnerabilities that could drive inflation higher, particularly wage growth.

The constant German inflation rate was aided by a 1.2 percent drop in energy prices compared to the same month last year.

However, energy prices fell less than in March, partly due to higher fuel expenses.

After Russia invaded Ukraine in early 2022, energy costs surged, but have since fallen, contributing to reduced overall inflation rates.

Food costs rose 0.5 percent, while service prices rose 3.4 percent, owing to wage increases in numerous areas, but the growth was smaller than in March.

The German government predicts 2.4 percent inflation this year, with a 5.9 percent rate in 2023.

According to preliminary figures, inflation in Spain increased marginally in April to 3.3 percent over the previous year, led by rising petrol and food prices.

A series of dramatic ECB interest rate hikes since 2022 have helped bring inflation back to the bank’s target of 2% across the eurozone.

However, as economic growth in the 20-nation single currency area slows, calls for cuts to begin soon are increasing louder.

Leave a Reply