According to preliminary figures released by the Federal Statistical Office (Destatis) on Tuesday, the German inflation rate dropped to 2.2 percent in March, reaching its lowest level since April 2021.
This decline indicates a continued easing of price pressure in the country. In March, energy prices fell by 2.7 percent and food prices declined by 0.7 percent year-on-year. Energy prices, which were the main contributors to inflation last year, have been decreasing recently, while food prices saw their first drop since 2015.
Predictions from the Ifo Institute for Economic Research suggest that inflation in Germany may dip below the European Central Bank’s (ECB) target of 2 percent as soon as this summer.
During the energy crisis, the ECB raised its key interest rate gradually to 4.5 percent and has maintained this level since September last year.
Ifo expert Timo Wollmershaeuser commented, “From Germany’s perspective, there’s no reason why the ECB shouldn’t reduce interest rates in the near future.”
Despite Germany being Europe’s largest economy and seeking lower interest rates to stimulate spending and investment, its economy shrank by 0.3 percent last year. Projections for the current year are not positive, with experts foreseeing a potential deeper recession or minimal growth.
At the same time, consumers in Germany remain cautious about their financial outlook. The German Retail Association noted, “A sustained and significant improvement in consumer sentiment is still not on the horizon.”
