German inflation cools slightly in October, fueled by fuel discount

“The continued high inflation rate was primarily due to developments in energy prices, although the reintroduced fuel discount likely dampened the increase,” stated Ruth Brand, President of the Federal Statistical Office.

Despite the overall decline, energy prices remain a significant factor, with fuel prices rising by 28.9 percent compared to the previous year. Heating oil prices saw a particularly sharp increase, jumping 84.5 percent last month due to the Iran conflict and supply difficulties with crude oil, natural gas, and other essential products.

However, a potential easing of pressure may be on the horizon. Silke Tober of the IMK-Institut at the Hans-Böckler Foundation noted that declining crude oil prices following the U.S. congressional elections could lead to further inflation reduction in November. She cautioned, however, that diesel prices remain elevated due to refinery bottlenecks and wholesale natural gas prices remain high.

Food prices also fluctuated, with egg prices rising 15.4 percent and fresh vegetables increasing by 11.5 percent. Conversely, butter prices fell by 18.9 percent, with dairy products down 4.7 percent and fresh fruit decreasing by 2.8 percent.

The core inflation rate, excluding volatile energy and food prices, also saw a slight decrease, falling to 2.1 percent from 2.4 percent in September. Services rose by 2.5 percent, compared to 2.7 percent in September, a positive sign for consumers, according to Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank.

The fuel discount, which could reduce fuel prices by up to 17 cents per liter, is in effect until the end of the year. Veronika Grimm, an economic advisor, has criticized the discount, arguing it subsidizes gasoline vehicles at the expense of younger generations and delays necessary structural reforms. There are also concerns that the savings may not be fully passed on to consumers.

A fuel price cap is being considered for implementation next year.

Despite the slight easing of inflation, which remains significantly above the central banks’ target of 2 percent, economists widely expect the European Central Bank (ECB) to raise its key interest rate to 2.75 percent in December.