Energy cheaper

German inflation down to 1.6 percent

Shopping in a supermarket in Germany

(Bild: APA/dpa/Sven Hoppe)

Inflation in Germany has fallen to its lowest level for around three and a half years. In September, consumer prices were 1.6 percent higher than in the same month last year, according to the Federal Statistical Office on Monday.

Consumers had to pay significantly less for energy in particular than in August (minus 7.6 percent). Prices for food and services, on the other hand, rose.

Inflation in Austria's neighboring country has already weakened significantly in recent months. In August, the global rate was 1.9 percent, compared to 2.3 percent in July. Economists assume that inflation will continue to fall. Prices are expected to rise by 2.2 percent this year and by just two percent in 2025.

Decline in consumption
The decline in inflation has not yet had an impact on consumption. Many Germans would currently rather save than spend their money on a home or consumption, according to reports. Private consumption is considered an important pillar of the German economy. According to Statistics Austria, the inflation rate in Austria fell to 2.4 percent in August.

"The latest developments strengthen our confidence that inflation will return to the target level in the near future. We will take this into account at our next monetary policy meeting in October," said the President of the European Central Bank, Christine Lagarde, in a press release. If inflation in Germany and the eurozone as a whole falls, key interest rates could be lowered.

The ECB recently lowered the deposit rate by 0.25 percentage points to 3.5 percent. The main refinancing rate, at which banks can borrow money, was reduced by 0.6 points to 3.65%. Further interest rate hikes are already expected on the stock markets.