Recent news has sparked optimism for a potential interest rate cut by the European Central Bank (ECB) as the policy committee prepares for a critical meeting this Thursday.
In a noteworthy development, Germany’s annual inflation rate reported a decrease to 2% in August, marking its lowest point since March 2021, according to final harmonized data released on Tuesday. This figure has been adjusted for cross-country comparisons within the EU, while the non-harmonized annual inflation stood slightly lower at 1.9%.
On a monthly basis, the harmonized inflation rate revealed a decline of -0.2% for August, with the non-harmonized data reflecting a reduction of -0.1%. These statistics reaffirm the preliminary results published earlier.
According to Ruth Brand, President of Germany’s Federal Statistical Office, “Falling energy prices have had a more pronounced effect on easing inflation in August compared to previous months.” However, she pointed out that persistent price hikes in the services sector, which are above average, continue to push inflation upwards.
Specifically, energy costs plummeted by 5.1% year-on-year, whereas service prices rose by 3.9%. Meanwhile, food prices experienced a 1.5% increase in August 2023, marking the fifth consecutive month of acceleration in year-on-year food inflation.
The current annual inflation rate of 2% indicates that while prices are still on the rise, the increase is occurring at a diminished rate. This data is likely to strengthen the case for the ECB to consider another interest rate cut during its upcoming meeting on Thursday.
Earlier this June, the central bank made a move to reduce borrowing costs following an extensive rate hike period that began in the summer of 2022. With the observed slowdown in price increases and low economic growth, there are signs indicating that the eurozone may weather economic stimulus without instigating a surge in inflation.
Photo credit & article inspired by: Euronews
