Germany's Inflation Slows to 0.2%, ECB Rate Cut Odds Rise
Germany's Harmonized Index of Consumer Prices (HICP) rose by just 0.2% in August compared to the previous month, according to data released today by the Federal Statistical Office (Destatis). This is slightly below both the market consensus and July's figure.
The annual HICP rate rose by 2.0% in August, down from 2.6% in July. The decline in the annual rate is largely attributed to a base effect from energy prices, which surged in August last year.
Food price inflation also moderated, while services inflation remained relatively sticky, reflecting persistent wage pressures in the sector. Core inflation, which excludes volatile food and energy prices, remains elevated at 2.9% year-on-year.
The softer-than-expected data reinforces expectations that the European Central Bank (ECB) will proceed with a gradual easing of monetary policy. Market participants now see a higher probability of a rate cut at the upcoming September meeting, as inflation moves closer to the ECB's 2% target.