in Germany, an unprecedented decline since 2021 – L’Express

in Germany an unprecedented decline since 2021 – LExpress

The confirmation was expected by economists. This Tuesday, September 10, German Statistical Office did indeed state that inflation in the country stood at 1.9% year-on-year in August, and at 2% for the harmonised index of consumer prices (HICP), an indicator used to compare inflation rates in European Union member states.

A result in line with the objective of a level below 2% that the European Central Bank (ECB) set for itself in July 2021. Germany’s consumer price index (CPI) had not reached such a low level since March 2021.

A slowed economy

“The fall in energy prices slowed inflation more significantly in August than in previous months,” said the president of the German Federal Statistical Office, Ruth Brand. In August 2024, fuel prices were down 6.9 percent and household energy prices (electricity, gas, etc.) were down 3.8 percent compared to the previous year.

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A drop in prices that the country was no longer accustomed to. The German economy, which is highly dependent on Russian gas and contracts with Beijing, has been severely affected by the war in Ukraine. The country recorded a recession in 2023 – its GDP fell by 0.3% last year and growth forecasts for 2024 are based, at best, on 0.5%. “German power was built on the myth of a happy and open globalization. The return of protectionism all over the planet is disrupting its software,” economist Marcel Fratzscher, director of the think tank DIW, explained to L’Express in May 2024.

Towards a new drop in rates?

Like Germany, France is experiencing a respite on the inflation front, as is the entire eurozone, which recorded a 2.2% slowdown in inflation over one year in August. Data that should encourage the ECB to reduce interest rates at its next meeting, expected this Thursday, September 12. Indeed, with a drop in inflation and control of wage increases, all the signals seem to be green for such a decision.

According to economists, the deposit facility rate, one of the three key rates that the ECB sets every six weeks, should be lowered by 25 points, to 3.50%. However, according to an economic note from INSEE, “the monetary easing undertaken would not yet produce its effects by the end of the year”.

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Last June, the ECB lowered its key rates for the first time since September 18, 2019. A decision that pleased private borrowers and EU member states. Across the Atlantic, the American central bank (Fed) is expected to begin lowering its rates at its next meeting scheduled for mid-September.

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