Germany's Inflation Decline Sparks Interest Rate Speculation

German inflation dropped more than anticipated in March to 2.3%, aiding the ECB's case for further interest rate cuts. Analysts anticipated a 2.4% rate, following February's 2.6%. The decline is driven by low oil prices and a sluggish economy. Core inflation also decreased.

German inflation has fallen more sharply than anticipated in March, according to newly released data, strengthening the argument for more interest rate cuts by the European Central Bank (ECB). The inflation rate decreased to 2.3%, as revealed by preliminary figures from the federal statistics office.

Market expectations, based on a Reuters poll, had predicted a March inflation figure of 2.4%, compared to the year-on-year rise of 2.6% in consumer prices reported in February. ZEW economist Friedrich Heinemann suggests that Germany is edging closer to price stability, typically defined at 2%, pointing to both falling oil prices and a sluggish economy as contributors to the trend.

The German data precedes the euro zone's inflation release, anticipated to register at 2.3% for March. The ECB, which has previously cut interest rates six times since last June, offers few clues about future actions. However, the recent decline in German inflation could prompt further rate cuts, as indicated by Commerzbank senior economist Ralph Solveen.

(With inputs from agencies.)