The inflation rate has reached a three-and-a-half-year low point.
Anticipated consumer price increase is predicted to be around 2.1% this month, as per economists, marking the lowest inflation rate since April 2021. This piece of news, however, doesn't seem to be dampening the economists' skepticism.
expect German inflation to have hit its record low since mid-2018 this August, as per the industry experts' predictions. Consumers are projected to see a 2.1% rise in prices compared to last year, according to a poll of twelve financial institutions. This figure represents the lowest inflation rate since the previous April. Interestingly, July saw a slight uptick to 2.3%, a minor increase from the June figure of 2.2%.
The preliminary August data will be released by the Federal Statistical Office on Thursday. Economists at Landesbank Hessen-Thüringen (Helaba) have pointed out a potential relief coming from energy prices. Fuel prices such as gasoline, diesel, and heating oil have seen a decline in August as compared to the previous month. As per ADAC, the automobile association, gasoline prices have hit their lowest point for the year recently.
Despite the positive developments, most experts remain cautious about the inflation scenario. "Wage negotiations continue to drive up prices for services," Helaba economists share, highlighting the increasingly common tendency of companies to pass on their elevated personnel costs to their customers. In July, service prices saw a substantial rise of 3.9% compared to the previous year. The pace of price rises in the German economy accelerated in August, reaching a six-month high, according to S&P Global's survey of numerous firms.
This surge in prices can be attributed to the fact that service providers increased their selling prices at a faster rate than before, as per the report. The European Central Bank (ECB) has set its inflation target at 2%, a figure it is now nearing again. Market speculation about a potential interest rate cut in September is also making headlines. Back in June, the ECB reversed its rate hike trend, lowering the interest rate from a record high of 4.50% to 4.25%. The ECB plans to adjust its approach based on market developments.
In light of the fluctuations in inflation rates, some analysts are suggesting that the ECB might need to reevaluate its monetary policy. The ECB, aiming to maintain its 2% inflation target, has been closely monitoring these developments.
