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The price is hot: A supermarket employee labels special prices on products

Photo: Julian Stratenschulte / dpa

Inflation in Germany weakened again in August. Goods and services cost an average of 6.1 percent more than a year earlier, according to the Federal Statistical Office in its first estimate. This time, however, economists had expected a decline to 6.0 percent.

In July, the inflation rate had fallen to 6.2 percent after rising to 6.4 percent in June. From July to August 2023, consumer prices are expected to increase by 0.3 percent, the Wiesbaden statisticians announced.

In August, food prices rose again at an above-average rate compared to the same month last year (plus 9.0 percent). The increase in energy prices (up 8.3 percent year-on-year) was also unusually high. In July, it was still 5.7 percent. The German government is trying to relieve the burden: The price brakes, which will apply retroactively to 1 January, are intended to make natural gas, electricity and district heating more affordable.

High inflation is slowing down private consumption, and people can afford one euro less. Energy and food prices in particular have risen sharply in recent months as a result of the Ukraine war.

There is still a long way to go before the rate of 2.0 percent

Already in the morning, inflation concerns had pushed the European stock markets into the red. This was prompted by the data for individual German federal states. Even then, it was foreseeable that there would be no significant decline in inflation in Germany in August. In four of the six Länder relevant for the first calculation of the nationwide inflation rate, consumer prices rose even more sharply again, while in the other two they fell.

In Spain, too, inflation picked up again in August. There is "still too much pressure in the inflation cauldron," said economist Bastian Hepperle of Bankhaus Hauck Aufhäuser Lampe. However, he was confident. "However, the rapid decline in producer and import prices gives reason to be confident that the surge in inflation will continue to decline in the coming months."

After all, inflation in Europe's largest economy is now a long way from its highest level since German reunification at 8.8 percent in autumn 2022. However, economists do not expect a return to a two before the decimal point in the inflation rate until next year's average. With medium-term inflation of 2.0 percent in the euro area, the monetary watchdogs of the European Central Bank (ECB) believe that their goal of stable prices has been achieved.

With interest rate hikes, the ECB is trying to dampen inflation, which has been high for months. Higher interest rates make loans more expensive, which can slow down demand. Since the summer of 2022, the central bank has raised interest rates nine times in a row. At 4.25 percent, the key interest rate at which commercial banks can obtain fresh money from the ECB is now as high as it was at the beginning of the global financial crisis in early October 2008. Whether there will be another interest rate hike at the next ECB meeting on September 14 or whether the euro currency guardians will take a break, central bank President Christine Lagarde left open.