Inflation in Germany reached its lowest level in almost three years in March. Consumer prices only increased by 2.2 percent. This fuels hopes of an interest rate cut.

Falling energy and food prices pushed inflation in Germany to its lowest level in almost three years in March. Consumer prices increased by only 2.2 percent compared to the same month last year, as the Federal Statistical Office announced its estimate on Tuesday. “This is the lowest value since April 2021,” the statisticians said. In February the inflation rate was 2.5 percent. From February to March prices rose 0.4 percent.

The fall in energy prices was mainly responsible for the fall in inflation: it cost on average 2.7 percent less than in March 2023, after these prices fell 2.4 percent in February. Food prices fell for the first time since February 2015, by 0.7 (February: +0.9) percent. Services were charged 3.7 percent (February: 3.4) more than the previous year. So-called core inflation, which excludes energy and food prices, fell slightly to 3.3 percent.

There is no euphoria among economists

However, economists still do not give the go-ahead. “At first glance you can sit back and relax,” says Commerzbank chief economist Jörg Krämer. “But the details call for caution.” This is particularly true of service prices, which have risen unexpectedly due to sharp rises in wages. “The headline inflation rate is also likely to rise slightly again in the coming months,” Krämer said. “It is too early for everything to be clear on the inflation front, as well as for the European Central Bank (ECB) to cut interest rates.”

German consumers can at least expect moderate inflation, because fewer and fewer companies want to raise their prices in the coming months: the barometer of their price expectations fell in March to its lowest level in three years, according to the Ifo Institute of Munich in its business survey. . “Inflation continues to decline and is likely to fall below 2 percent in the summer,” said Ifo economic director Timo Wollmershäuser. “From the German perspective, there is nothing to contradict the ECB reducing interest rates soon.”

The monetary authorities in Frankfurt aim for an inflation rate of two percent in the euro zone. According to a poll by the Reuters news agency, a large majority of economists currently expect a first interest rate cut in June.

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