German inflation slows to 9.6 percent

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FRANKFURT — Inflation in Germany eased for the second straight month in December and by more than expected, adding to hopes that the worst of the cost-of-living crisis may soon be over.

German consumer prices rose by 9.6 percent, slowing from 11.3 per cent in November, preliminary data released by Germany’s statistics office showed Tuesday. Analysts had generally expected a more moderate decline.

Measured in national terms and not harmonized terms to compare with other eurozone member states German inflation eased to 8.6 percent from 10 percent in November.

Over the full year, inflation is estimated to be 8.7 percent above the previous year’s average, marking the sharpest increase on record.

Bundesbank President Joachim Nagel had anticipated a sizeable decline in headline inflation as government subsidies to limit gas prices take effect. However, the institution warned that inflation is likely to remain at more than three times the European Central Bank’s 2 percent price stability target in 2023 before declining more significantly 2024.

“The decline in inflation at the end of the year is mainly driven by three factors,” said ZEW economist Friedrich Heinemann, citing government subsidies, lower oil prices and the appreciation of the euro which has made imports into the eurozone cheaper. However, he also cautioned that a return to price stability this year remains unattainable.

Eurozone inflation estimates will be released Friday, with a Reuters survey of analysts pointing to a decline to 9.7 percent from 10.1 percent in November.

However, ECB President Christine Lagarde has cautioned that prices may jump up again in January and February. This is when previous spikes in energy prices are expected to reach the retail level, before coming down more durably.