🎁 💸 Warren Buffett's Top Picks Are Up +49.1%. Copy Them to Your Watchlist – For FreeCopy Portfolio

Inflation down in German states, pointing to national decline

Published 01/31/2024, 04:52 AM
Updated 01/31/2024, 05:16 AM
© Reuters. FILE PHOTO: A double decker bus passes the skyline with its dominating banking district in Frankfurt, Germany, November 8, 2023.  REUTERS/Kai Pfaffenbach/File Photo

By Maria Martinez

BERLIN (Reuters) -Inflation fell in six economically important German states in January, preliminary data showed on Wednesday, suggesting that national inflation has resumed its downward trajectory and raising hopes for a decline in euro zone inflation.

The inflation rate in North Rhine-Westphalia, Germany's most populous state, fell to 3.0% in January from 3.5% in December.

In Bavaria, the rate fell to 2.9% from 3.4% in December, while declining to 3.7% in Brandenburg from 4.5%, to 3.5% in Saxony from 4.3%, to 3.2% in Baden-Wuerttemberg from 3.8%, and to 2.2% in Hesse from 3.5% the previous month.

Economists will pay close attention to national inflation data later on Wednesday, as Germany and France publish their figures before expected euro zone inflation data on Thursday.

French figures showed EU-harmonised inflation falling to 3.4% in January from 4.1% in December.

Euro zone inflation is expected to dip to 2.8% in January from 2.9% the month before, according to economists polled by Reuters.

"I am now convinced that we have tamed that greedy beast," European Central Bank (ECB) policymaker Joachim Nagel said on Tuesday.

The ECB has raised interest rates by the most in the euro's history to bring inflation down from double-digits. The bank is now expected to start cutting borrowing costs in the spring.

In the German states, cheaper energy was responsible for the fall in inflation, offsetting the end of several anti-crisis policy support measures that pushed inflation higher.

According to Deutsche Bank economists, the end of energy price brakes, raising the VAT rate from 7% to 19% for gas and district heating and for food at restaurants, and lifting the national carbon price to 45 euros per tonne from 30 euros might together add 0.6 percentage points to the January reading.

© Reuters. FILE PHOTO: A double decker bus passes the skyline with its dominating banking district in Frankfurt, Germany, November 8, 2023.  REUTERS/Kai Pfaffenbach/File Photo

Economists polled by Reuters forecast Germany's harmonised inflation at 3.2% in January, down from 3.8% in December.

"In light of the uncertainty with regards to the exact pass-through of the ending of the anti-crisis policy support measures on consumers, we reckon that the January print has the potential for a larger degree of upward and downward surprises," Deutsche Bank's Sebastian Becker said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.