Inflation dips in key German states in October, pointing to national fall

German Inflation Slips in Key States in October 2023, Hinting at National Fall

Key Developments in German and Euro Zone Inflation

State-Level Inflation Trends in Germany

BERLIN, Oct 30 (Reuters) - Inflation fell in several key German states in October, preliminary data showed on Friday, suggesting Germany's national inflation rate could also decrease this month.

Inflation Rates by State

• In Bavaria, the inflation rate fell to 2.8% in October from 3.2% in September. In North Rhine-Westphalia it dipped to 2.7% from 3.3%, while in Lower Saxony it fell to 2.9% from 3.3%. Baden-Wuerttemberg saw a 0.3 percentage point fall to 2.6% while in Saxony the inflation rate remained at 2.8%.

Factors Influencing Inflation

Impact of Energy Prices and Geopolitical Events

• The war in Iran has pushed up energy prices in recent months, and the German government currently expects inflation to reach 2.7% this year and 3.0% in 2027.

National and Euro Zone Inflation Outlook

Forecasts for Germany

• Economists polled by Reuters are forecasting a harmonised national inflation rate in Germany - the euro zone's largest economy - of 3.1% in October, down from 3.3% in the previous month. National figures will be released later on Friday.

Euro Zone Inflation Expectations

• The German data comes ahead of the euro zone inflation release on Wednesday. Inflation in the bloc is expected to come in at 3.9% in October, slightly above September's 3.8%, according to economists polled by Reuters.

European Central Bank Policy Response

Interest Rate Decisions

• The European Central Bank left interest rates unchanged on Thursday but clearly hinted at another hike in December, with a warning that high and rising energy costs were fuelling inflation risks.

Editorial Note

(Writing by Miranda Murray, Editing by Friederike Heine)