Inflation falls in German states, signaling national recession

  

Preliminary data showed on Tuesday that inflation rates fell in six key German economic states in March, indicating that the national inflation rate will continue to decline. Economists will be keeping a close eye on national inflation data later in the day, as Germany is due to release its data a day ahead of euro zone inflation figures on Wednesday. Inflation in North Rhine-Westphalia, Germany's most populous state, fell to 2.3% in March from 2.6% in February. Inflation also fell in Bavaria to 2.3% from 2.6% in February, in Brandenburg from 3.5% to 2.8%, in Saxony from 3.0% to 2.5%, and in Baden-Württemberg from 2.7%. It fell to 2.3% and in Hesse it rose from 2.1% to 1.6%. Economists surveyed forecast Germany's unified inflation rate at 2.4% in March, down from 2.7% in February.

German companies' price expectations fell to their lowest level in three years in March and inflation will remain below the European Central Bank's target in the coming months, the Ifo institute said on Tuesday. The European Central Bank (ECB) has raised interest rates by the highest rate in euro history in a bid to bring inflation down from double digits. European Central Bank President Christine Lagarde said in March that euro zone inflation will continue to decline and economic growth will begin to accelerate during the year.

Franziska Palmas, senior European economist at Capital Economics, said: “The fall in consumer price index (CPI) inflation in the main German states in March all but confirms that the And euro zone unified inflation will be lower than expected." A growing number of ECB policymakers support a rate cut, with action at the June meeting most likely, although there is also a meeting this month. Palmas said lower-than-expected euro zone inflation data would please ECB policymakers. "But we still think they will wait until June before cutting rates."