Is the ECB reacting?
Inflation is at its lowest level in almost three years
April 2, 2024, 2:02 p.m
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Inflation in Germany weakened further in March. As expected by experts, the inflation rate was still 2.2 percent. What’s exciting now is: How does the ECB react?
Cheaper energy and food pushed inflation in Germany to its lowest level in almost three years in March. Consumer prices only rose by 2.2 percent compared to the same month last year, according to the Federal Statistical Office’s estimate. “This is the lowest value since April 2021,” said the statisticians. Economists interviewed by the Reuters news agency had predicted this exactly. In February the inflation rate was 2.5 percent. From February to March prices rose by 0.4 percent.
“From a German perspective, the two percent price target has almost been reached, but concerns about inflation remain,” said Alexander Krüger, chief economist Hauck at Aufhäuser Lamp Privatbank, to ntv.de. “Over the next few months, the inflation rate is likely to rise slightly. This does not change the general trend of easing inflation. However, high wage agreements and increased agricultural raw material prices are a threat. The ECB’s dependence on data regarding interest rate cuts therefore makes sense.”
Cheaper energy was primarily responsible for the falling inflation: it cost an average of 2.7 percent less than in March 2023, after these prices fell by 2.4 percent in February. Food prices fell for the first time since February 2015, by 0.7 (February: +0.9) percent. 3.7 (February: 3.4) percent more were charged for services than a year before. The so-called core inflation – which excludes energy and food prices – fell slightly to 3.3 percent.
German consumers can hope for further falling inflation because fewer companies want to raise their prices in the next few months: the barometer for their price expectations fell to its lowest level in three years in March, as the Munich-based IFO Institute found in its company survey. “Inflation is continuing to decline and is likely to fall below the two percent mark in the summer,” said IFO economics chief Timo Wollmershäuser: “From a German perspective, there is nothing to speak against the ECB cutting interest rates soon.”
The Frankfurt monetary authorities are aiming for an inflation rate of two percent in the euro zone. According to a survey by the Reuters news agency, a large majority of economists currently expect a first interest rate cut in June.