Inflation in Germany stable at 2.2 percent

Inflation in Germany stable at 2.2 percent

In April of this year, an inflation rate of 2.2 percent was recorded in Germany, as the Federal Statistical Office in Wiesbaden announced in an initial estimate. Compared to the previous month, the rate remained unchanged after being 2.5 percent in February. Household energy prices have had a depressing effect on inflation as they have fallen year-on-year, particularly for forms of energy such as district heating, which saw a 35 percent increase.

The Middle East conflict led to a significant increase in oil prices, which was noticeable at gas stations. Gasoline prices rose by 2.4 percent compared to the previous year, while diesel rose by 3 percent. Food items such as dairy, eggs and vegetables became cheaper year-on-year, with cucumbers and tomatoes seeing significant price declines.

Regarding other food groups, the prices of bread, meat, fish, cooking fats, oils, fruits and various juices increased significantly. Costs for restaurant visits, hotel stays and package tours also became more expensive. Holger Schmieding, chief economist at Berenberg Bank, said that the overall downward trend in inflation remained intact and mentioned that the renewed increase in VAT on gas and district heating could increase the inflation rate by around 0.15 percentage points in April.

The Bundesbank recently warned in its monthly report of a possible rise in inflation in Germany to 3 percent in May. ECB experts debated whether interest rate policy should be decoupled from the Fed, particularly in light of an expected ECB interest rate cut in June. The uncertainty remains about how the ECB will proceed after a potential interest rate cut. Although ECB President Christine Lagarde signaled independent decision-making by the ECB, some members of the Governing Council expressed concerns about the possible impact of different interest rate policies between the US and the euro area.