German inflation rate fell to 3.1% in January, slightly more than what was projected due to a drop in energy prices, according to preliminary data from the federal statistics office reported by Reuters on Wednesday. Harmonised German consumer prices, which allow for comparison with other European Union countries, experienced a 3.8 per cent increase from the previous year in December. Before the expected release of euro zone inflation statistics on Thursday, economists are keeping a close watch on these figures, especially those from Germany and France. The EU-harmonised inflation in France dropped to 3.4 per cent in January, down from 4.1 per cent in December, according to the French figures. "It's unclear if this suffices to see tomorrow's print for the whole block coming in below consensus expectation of 2.8 per cent, but if so, this would raise the odds of an April European Central Bank (ECB) cut," stated Mateusz Urban, senior economist at Oxford Economics, referring to German and French inflation data. Economists polled by Reuters anticipate a decrease in Euro zone inflation to 2.8 per cent in January, down from 2.9 per cent the previous month. The ECB has made the largest interest rate hike in the euro's history to combat double-digit inflation, and it's anticipated that the bank will begin reducing borrowing this spring. Energy prices, which fell by 2.8 per cent compared to the same month last year, were the primary reason for the reduction in German inflation. This occurred even with the termination of a government policy that kept energy prices in check and the introduction of a higher carbon price. Meanwhile, core inflation, which doesn't consider the fluctuating food and energy prices, decreased slightly to 3.4 per cent in January from 3.5 per cent in the preceding month.
