In September, inflation rates in six German states decreased, indicating a slowdown in overall inflation data to be published later today. This trend is fueling calls for the European Central Bank (ECB, Financial) to cut interest rates in October.
Preliminary data released on Monday showed that the Consumer Price Index (CPI) in North Rhine-Westphalia, Germany's most populous state, dropped from 1.7% in August to 1.5% year-on-year. In Hesse, the CPI growth rate decreased from 1.5% to 1.2% year-on-year.
Last Friday, both France and Spain reported inflation figures below the ECB's 2% target. Analysts surveyed by Bloomberg expect Germany's overall inflation rate to hit 1.8%, marking the first dip below 2% since February 2021.
An hour after Germany publishes its August CPI data later today, ECB President Christine Lagarde will address EU lawmakers, likely commenting on investors' substantial bets on a rate cut on October 17. The likelihood of a rate cut is currently estimated at 80% by the currency market.
Bloomberg economist Jamie Rush noted that the projected national inflation rate for September is 1.8%, down from 2% the previous month. Based on state CPI data, it appears that the national rate will align closely with these forecasts. Looking forward, inflation is expected to rise slightly in the coming months due to base effects, potentially until 2025.
According to the Ifo Institute for Economic Research, fewer German businesses plan to raise prices. In September, the price expectations index fell from 16.1 to 13.8, its lowest level since February 2021. Timo Wollmershäuser, head of economic research at Ifo, stated that the economic crisis is limiting companies' ability to increase prices, suggesting that Germany's inflation rate will likely remain below the ECB's 2% target in the coming months.
