The energy is significantly more expensive: the German inflation rate drops to 2.0% in July – economy

Rising energy prices also led to inflation in Germany in July. According to preliminary data from the Federal Statistical Office on Monday, consumer prices rose 2.0% over the same month of the previous year. It was the third month in a row with a 2 before comma. In June, the inflation rate was still 2.1%, in May by 2.2%. Compared to June 2018, consumer prices rose 0.3%. The European Central Bank estimates that inflation rates of nearly two percent are ideal for the euro area economy

Consumers in particular have had to pay more for domestic energy and fuels than the previous year (plus 6.6 percent), Foods were also above the same month last year than the average (over 2.6 percent). However, price increases have slowed down. In the months from April to June, this group of products still had a third before the comma.

Agriculture groans under the effects of hot, dry summer weather. In part, significant crop losses are expected. This should however take some time before a possible price increase for some agricultural products is reflected in consumer prices, explained an expert from the Federal Office. The full picture of the damage is likely to be available only after the balance of crops at the end of the month of August.

Jörg Zeuner, chief economist of the KfW Development Bank, predicts that the inflation rate will tend to decrease somewhat over the next few months. "Because crude oil prices as the youngest main drivers are even lower."

The European Central Bank aims in the medium term at a total inflation rate of just under 2.0% for the euro area. This value is a guarantee of a stable economic development, because it is sufficiently far from zero. Because prices are constantly low or even down on a broad front, could entice the company and consumers to postpone the investment. This could then slow down economic growth.

Because inflation has been rising for some time, the central bank has promised to end its controversial badet purchases at the end of the year. However, interest rates in the euro area are expected to remain at historically low levels at least "during the summer" of 2019. (dpa, Reuters)