Germany's Inflation Drops More Than Expected in February

(MENAFN) Germany's annual inflation rate cooled more sharply than anticipated in February, slipping to 1.9% from 2.1% the prior month — falling below the 2% threshold that markets had penciled in, according to a preliminary estimate published Friday by the Federal Statistical Office (Destatis).

The softer-than-expected reading was driven largely by a continued retreat in energy prices, which fell 1.9% year-on-year in February — accelerating from a 1.7% decline recorded in January. On a monthly basis, consumer prices rose just 0.2%, falling well short of the 0.5% increase analysts had forecast.

Not all components pointed downward, however. Services prices climbed 3.2% annually, while food prices rose 1.1% — both exerting upward pressure on the headline figure. Food inflation did ease meaningfully from January's 2.1% reading, offering some relief to consumers.

Core inflation — which strips out volatile food and energy components — held steady at 2.5% on an annual basis in February, signaling that underlying price pressures remain entrenched despite the headline softening.

The February print extends a broadly moderating trend. Inflation stood at 2.1% in January and 1.8% in December, after running at 2.3% in November and 2.4% in both October and September — up from 2.2% in August and 2% in July and June, the lowest level since October 2024. Earlier in the year, CPI figures came in at 2.1% in both April and May and 2.2% in March, retreating from a 14-month high of 2.6% recorded in December 2024.

The latest data is likely to reinforce expectations that the European Central Bank has room to maintain its current policy path, as inflation in the eurozone's largest economy edges closer to the ECB's medium-term 2% target.

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