German Inflation Falls Further Below ECB Target, Raising Chance of October Rate Cut

By Ed Frankl

German inflation declined further below the European Central Bank's 2% target in September, further raising the pressure for a consecutive interest-rate cut at the bank's next meeting in October.

Consumer prices were 1.6% higher than in September last year, down from the 1.9% in August, German statistics office Destatis said Monday, the lowest since February 2021. It was slightly lower than consensus of 1.7%, from economists polled by The Wall Street Journal.

The German data comes after inflation cooled more rapidly than expected in France and Spain, increasing the chance of an ECB rate cut on Oct. 17, after the central bank cut its key deposit rate to 3.5% earlier in September.

While much of the pulldown in inflation in September was due to lower energy prices, services inflation, which is closely watched by ECB policymakers, also edged down to 3.8% from 3.9% in August.

With the German economy in a fragile position, having already shrunk in the second quarter of this year and facing a persistent manufacturing slump, an ECB cut could also help spur much-needed economic activity.

Write to Ed Frankl at edward.frankl@wsj.com

(END) Dow Jones Newswires

September 30, 2024 08:28 ET (12:28 GMT)

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