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Food prices have also leveled off again in recent months (symbolic image)

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Inflation in Germany continues to level off. Economists predict that consumer prices will only have risen by 2.2 percent compared to the same month last year. That would be the lowest value since June 2021.

In February, inflation had already fallen to 2.5 percent, mainly due to cheaper energy and hardly any rising food prices. The Federal Statistical Office wants to publish a first official estimate on Tuesday afternoon.

“The final stage of the disinflation process that lies ahead is likely to be relatively bumpy.”

Sebastian Becker, economist at Deutsche Bank

Inflation rates could fall further

In the spring, the inflation rate could even fall below the two percent mark, said economist Sebastian Becker from Deutsche Bank. “That would be a welcome development and, above all, could improve consumer sentiment,” says Becker.

However, he has not yet given the complete all-clear. "The final stage of the disinflation process that lies ahead is likely to be relatively bumpy," he warned. In April, the VAT rate on gas and district heating was raised from the temporary seven percent back to the old level of 19 percent, which is likely to make these energy products more expensive. Economists also expect that significant wage increases could lead many service providers to noticeably raise their prices in the future.

Neighboring countries confirm disinflation trend

If the inflation rate in Europe's largest economy approaches the two percent target set by the European Central Bank (ECB), the likelihood of an imminent interest rate cut by the monetary authorities increases. Most experts are currently assuming that the ECB will reduce its key interest rate from the current 4.5 percent for the first time in June.

In France, the second largest economy after Germany, the inflation rate fell surprisingly significantly to 2.4 percent in March - the lowest value was in August 2021. In Italy, number three in the euro zone, prices also rose weaker than expected at 1.3 percent . Both values ​​are calculated according to uniform European standards. If one applies this benchmark to the German inflation rate, it is likely to have fallen to 2.4 percent in March from 2.7 percent in February.

flg/Reuters