Preliminary data released on Friday indicated that inflation slowed in four major German states in May, strengthening expectations that the country’s overall inflation rate may edge lower this month despite ongoing pressure from energy costs linked to the conflict in Iran.
In Bavaria, inflation fell to 2.6 per cent in May from 2.9 per cent in April. North Rhine-Westphalia recorded a decline to 2.4 per cent from 2.7 per cent, while Baden-Wuerttemberg also eased to 2.4 per cent from 2.6 per cent. In Lower Saxony, inflation dropped to 2.7 per cent compared with 3.0 per cent in the previous month.
While price pressures appeared to be moderating in parts of the country, analysts said rising energy and commodity costs linked to the Iran conflict continue to weigh on Germany’s broader economic outlook.
The government currently projects inflation to average 2.7 per cent this year, with a possible rise to 2.8 per cent in 2027.
Economists surveyed by Reuters expect Germany’s harmonised inflation rate used for eurozone comparison to come in at about 2.8 per cent in May, slightly below April’s 2.9 per cent.
The country’s official national inflation figures are expected to be released later.
The data also comes ahead of next week’s wider eurozone inflation report, where analysts forecast inflation across the bloc to rise to 3.3 per cent in May, up from 3.0 per cent in April, according to a Reuters poll.
The European Central Bank (ECB) left interest rates unchanged at its April meeting, but persistently high inflation across the euro area has kept expectations alive that policymakers may consider further monetary policy adjustments in the coming months.
