Customers will shop for fresh fruits and vegetables at a supermarket in Munich, Germany on March 8, 2025.
Michael Nuguen | nuphoto | Getty Images
Germany’s inflation came at a lower than expected 2.3% in March, preliminary data from the national statistics office was shown on Monday.
The Reuters Economist poll, which was revised lower from preliminary measurements compared to 2.6% printed in February, predicted inflation rates would occur at 2.4%, is in harmony across the euro territory for comparability.
Each month, harmonized inflation rose 0.4%. Core inflation, excluding food and energy costs, put readings of 2.7% in February to below 2.5%.
Meanwhile, it has been sticky for a long time, relaxing from 3.8% in the previous month to 3.4% in March.
An important time for the economy
Data is at a critical time for the German economy as President Donald Trump’s tariffs are looming and changes in fiscal and economic policy may be imminent.
Trade is an important pillar of the German economy, making it more vulnerable to uncertainty, and the development that currently controls global trade policy is changing rapidly. A large number of taxes from the US are expected to come into effect this week. This includes 25% tariffs on imported cars. This is the sector that is key to Germany’s economy. The country’s political leaders and the heavyweights of the automotive industry are denounced Trump’s plans.
However, it is still unclear how trade disputes will affect inflation, ING’s global head of macros, Karsten Bruzeski, noted on Monday.
“The looming escalation of trade tensions and the possibility of European retaliation against US tariffs could increase inflationary pressures in the short term,” he said.
“However, in the long term, the trade war could also turn into a separativity for Germany and the eurozone if growth is weakened and companies could potentially increase their inventory,” Brezesky said that goods originally produced for the US market could ultimately be sold in Europe.
Meanwhile, German political parties are working to establish a new coalition government following the results of the February 2025 federal election. Negotiations are underway between the Christian Democratic Union and its sister parties, the Christian Social Union and the Social Democratic Union.
While various aspects of the competition appear to remain between the parties, their consultations have already brought about several outcomes. Earlier this month, German lawmakers voted in favor of a major fiscal package that includes a long-standing revision of debt rules to enable higher defence spending and a 50 billion euro ($54.1 billion) infrastructure fund.
Where to decide on the ECB rate
Monday’s inflation count from Germany, combined with recent data from other major Eurozone countries such as Spain and France, suggests that headline inflation in the eurozone is likely to ease in March.
France’s harmonious inflation changed at 0.9% on an annual basis in March, lower than expected. In Spain, reading fell from 2.9% the previous month, lower than expected, dropping sharply to 2.2%.
Eurozone inflation is scheduled for Tuesday. The economist voted by Reuters last predicted reading at 2.3%.
“German figures suggest that headline inflation in the eurozone, along with figures from France, Italy and Spain, is likely at 2.2% in March, a little below expectations,” Palmas said Monday. Core inflation is expected to remain unchanged or slightly lower than February, she added.
“The service inflation will likely also decrease, and will please ECB officials,” she said, adding that “Germany’s thick collapse should do more than offset the 0.1% rise in France and Italy.”
“This will increase the likelihood that the ECB will be reduced again in line with forecasts, rather than pausing,” Palmas said.
LSEG data shows the market was the last priced price, about 91% of the time a 25 base point interest rate cut from the ECB on April 17th.
