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German inflation drops to slowest pace since mid-2021

January 31, 2024

Preliminary data has shown Germany's inflation rate coming in at 2.9% in January, partly driven by falling energy prices. Rising cost of food has also slowed.

https://p.dw.com/p/4bstH
A person holds a product near the price tag in a discount supermarket in Berlin
Food price are still increasing, but not as much as they had beenImage: Annegret Hilse/REUTERS

German consumer prices increased in January by 2.9% annually, down from 3.7% in December, according to preliminary data from federal statistics agency Destatis released on Wednesday.

The data office said it is the lowest figure since June 2021, when the consumer price index (CPI) rose by 2.4%.

Energy cost 2.8% less in January than a year earlier.

The cost of food increased year-on-year by 3.8% in January, which is lower than the of 4.5% seen in December and 5.5% in November.

Hopes for interest rate cuts 

Although inflation in Europe's largest economy has resumed its downward trajectory, it may not be enough for the European Central Bank (ECB) to consider lowering borrowing costs in the short term. 

On January 25, the ECB kept key interest rates steady in a bid to bring inflation in the Eurozone back to its 2% target. 

ECB president Christine Lagarde said last week the first reduction would "likely" only come by summer, and only if the latest economic data supported it.

Survey data released on Wednesday by Munich-based the Munich-based ifo Institute economic research group indicated that many consumer-facing companies in Germany plan to increase prices in the year ahead. 

"Inflation is therefore likely to fall only slowly in the coming months," ifo economic research director Timo Wollmershäuser said. 

lo/wmr (dpa, afp, Reuters)