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3w ago

Germany’s Inflation Slows to 2.1% in May, Underpinning ECB Rate-Cut Expectations

Energy costs fell 4.6% with services inflation easing to 3.4%, leaving core prices still above target before the June 5 ECB decision

The skyline is photographed in Frankfurt, Germany, January 22, 2021, REUTERS/Kai Pfaffenbach/File Photo
A customer pushes a shopping trolley at a fruit and vegetable market in Barcelona, Spain October 15, 2024. REUTERS/Nacho Doce/File Photo
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Overview

  • Annual consumer prices in Germany eased to 2.1% in May from 2.2% in April, slightly above the 2.0% forecast
  • Energy prices tumbled for a second month, dropping 4.6% and weighing on overall inflation
  • Services inflation cooled to 3.4% even as core inflation excluding food and energy ticked up to 2.9%
  • Market data show traders see over a 96% chance of a 25-basis-point rate reduction by the ECB on June 5
  • Germany’s new government has made economic stability a priority amid trade-policy risks from U.S. tariffs