German inflation eases to lowest rate since June 2021

German inflation continued to ease in January, official data showed on Wednesday, as energy prices fell sharply.

According to provisional figures from Destatis, the Federal Statistical Office, the consumer price index was 2.9% in January, the lowest since June 2021, when it was 2.4%. Analysts had been forecasting CPI of 3.0%.

Month-on-month, inflation rose 0.2%.

The fall was led by energy prices, which fell 2.8%. The increase in food prices also slowed, to 3.8%.

Core inflation - which strips out the more volatile elements of food and energy - fell just 0.1 percentage point to 3.4%.

The harmonised index of consumer prices, meanwhile, rose 3.1% year-on-year - marginally below consensus for 3.2% - and eased 0.2% on December. All European Union members use the same methodology to calculate HICP.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: "On the face of it is, this is a dovish set of numbers, but only marginally and much less dovish than our initial expectations.

"Overall, we need to see Thursday’s eurozone inflation data before revising or reiterating our call for an European Central Bank rate cut in March.

"For the record, we now think Eurozone inflation stood at 2.7% in January, down 0.1pp from December.

"We remain confident that the bank will have to downgrade its 2024 inflation forecasts in March, again. But will it be enough for a March cut, or will the ECB wait until April or even June?"