German Inflation Slows More Than Expected

Thursday 28th Sept 2023 – 13:35 (BST)

Figures released by the Statistisches Bundesmant Deutschland have indicated that German inflation fell more than expected during September. Preliminary estimates show consumer prices increased 4.5% over the month – down sharply from August’s 6.1% acceleration and in slightly below market expectations of 4.6%.

This signalled the lowest inflation since the outbreak of the war in Ukraine during February 2022 as prices grew at a slower pace for both services and goods. Further cooldown in inflation in Europe’s largest economy is likely to hint at softer inflation readings in the bloc’s overall inflation data, which will be published on Friday.

However, European Central Bank President Christine Lagarde stated on Monday that price growth is likely to remain “too high for too long” despite the recent decline. “Strong spending on holidays and travel and increasing wages were slowing the decline in price levels even as the economy stays sluggish”, she added.

Euro demand softened following the latest readings as interest rate speculation also continued to ease. The ECB recently raised its benchmark deposit rate to an all-time high of 4% after a record pace of increases from -0.5% in July 2022.

Analysts now widely believe that the ECB may be done raising rates given signs of increasing weakness in the European economy. Other central banks, including the Bank of England and the U.S. Federal Reserve, held off on rate increases last week as they draw closer to the end of their rapid hiking campaigns.