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Finance

Posted By Global Banking and Finance Review

Posted on January 31, 2025

German inflation holds steady at 2.8% in January

By Maria Martinez

BERLIN (Reuters) - Germany's annual inflation rate held steady in January but core inflation eased markedly, keeping intact expectations of further interest rate cuts from the European Central Bank.

German inflation remained at 2.8% this month, in line with forecasts, preliminary data showed on Friday,

Core inflation, which excludes volatile food and energy prices, eased to 2.9% in January from 3.3% in December.

Andrew Kenningham, chief Europe economist at Capital Economics, said regional and national data published so far suggested euro zone inflation - due on Monday - may come in a bit lower than anticipated.

"This would support those on the European Central Bank Governing Council arguing for significantly more policy easing in the coming months," Kenningham said.

French consumer prices increased slightly less than anticipated in January, preliminary data showed on Friday, with the harmonised rate at 1.8%.

Economists polled by Reuters expect data on Monday to show euro zone inflation held at 2.4% in January, unchanged from the previous month.

The ECB cut interest rates on Thursday and kept the door open for a further reduction in March as concerns over lacklustre economic growth trump worries about inflation.

Markets are pricing in three further rate cuts in the euro zone this year.

However, separate surveys on Friday showed euro zone consumers and economists' inflation expectations for this year had increased, raising some doubts about the ECB's assertion that price growth is firmly under control.

In Germany, a survey from the Ifo institute on Friday indicated fewer manufacturers plan to raise their prices, but more consumer-related service providers want to raise theirs.

"The inflation rate is therefore also expected to be at around 2.5% in the coming months, hence above the ECB's target," said Timo Wollmershaeuser, head of forecasts at Ifo.

(Reporting by Maria Martinez, Editing by Miranda Murray, Kevin Liffey and Christina Fincher)

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