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Inflation in Germany drops again in March

April 2, 2024

Year-on-year inflation dropped to 2.2% last month in part due to a decrease in energy prices. It remains to be seen whether the European Central Bank will cut interest rates in response to easing inflation.

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Three fingers examining 50, 20, and 10 euro notes in wallet
Inflation in Germany has continued to weaken, according to the Destatis statistics agencyImage: Monika Skolimowska/dpa/picture alliance

Inflation in Germany dropped in March, Germany's statistics agency Destatis said on Monday.

Consumer prices fell to 2.2% year-on-year, compared to 2.5% in February.

This is the lowest inflation figure since April 2021, when it was 2%.

The annual inflation rate in January of this year was 2.9%.

The weakening of inflation has been buoyed by a decrease in energy prices.

Energy became 2.7% cheaper in March despite the expiry of the energy price cap at the beginning of the year and the increase in the carbon price to €45 ($48.36) per ton of CO2.

Could the ECB cut interest rates?

Carsten Brzeski, a researcher at the ING Bank, said that "inflation in Germany could drop to two percent as soon as next month," adding that the rate could slightly increase again in the coming months.

He said that the continued slowdown in inflation could be a sign that the European Central Bank's (ECB) interest rate hikes were taking effect.

The ECB raised interest rates starting in mid-2022 in response to soaring inflation.

In March, ECB President Christine Lagarde warned against the risk of acting "too late" to begin lowering interest rates again.

sdi/lo (AFP, dpa)

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