In August, Germany recorded a slowdown in the inflation process to the target level of the European Central Bank (ECB).

The mentioned result is a kind of argument in favor of the fact that it would be advisable for the European financial regulator, which is the ECB, to make a decision next month to continue to ease monetary policy, which implies cutting interest rates.

In August, inflation in Germany was recorded at 2%. It is worth noting that this figure is the lowest since 2021. In July, inflation in Germany was recorded at 2.6%. Experts interviewed by the media predicted less optimistic prospects for the dynamic of the growth in the cost of goods and services in the mentioned country in August.

Also, at present, there is an improvement in what can be called the inflationary situation in Spain. In this country, a significant weakening of price pressure was recorded in August. The corresponding figure reached an annual minimum.

There is also a widespread expectation among experts that the tendency of the slowdown in the inflation process will spread to other major economies in the eurozone, including France and Italy. The relevant data will be released on Friday, August 30.

Analysts interviewed by the media predict that the average inflation rate in the eurozone will be recorded at 2.2%.

Expectations are currently growing that the ECB will decide in September to continue the easing of monetary policy that began in June. Supporters of this point of view say that the appropriateness of this decision is associated with such factors as a slowdown in the dynamic of the growth of prices, easing pressure on wages, and faltering economic momentum.

It is worth noting that the ECB has begun to implement a strategy of raising interest rates as part of counteracting rising inflation.

Economist Maeva Cousin says that a sharper-than-expected decline in inflation in Germany is likely to be an impacting factor in the decision to lower borrowing costs in September. At the same time, the expert suggests that against the background of core inflation above 3% and inflation in the services area below 4% in the mentioned economic system, the Governing Council to maintain a gradual, quarterly pace of cuts for now.

It is worth noting that ECB officials have repeatedly said that the fight against inflation is not yet over and the current state of affairs is not what can be described as a final victory, the implementation of which is carried out gradually. They also note that the dynamic of prices in the services area is a cause for serious concern.

Carsten Brzeski, ING’s global head of macro, says that the slowdown in inflation in Germany is the result of lower energy prices and a favorable base effectы. According to the expert, it is too early to give a full assessment of inflation both in Germany and across the eurozone.

Chief Economist Philip Lane warned last week that the ECB has not yet achieved a return to its 2% inflation target. In a related context, he also said that monetary policy should remain restrictive for now. This week, Philip Lane noted that wage growth will slow sharply over the next two years.

As we have reported earlier, Germany’s Business Outlook Remains Low.