Provisional figures from the Federal Statistical Office (Destatis) have found that the German inflation rate sat at +2,9 percent in January 2024, the lowest value since June 2021.

Destatis publishes provisional German inflation rate for January 2024

Initial Destatis analysis predicts that Germany’s inflation rate sat at +2,9 percent in January 2024. This marks its lowest level since June 2021 and a significant drop compared to the +8,7 percent rate in the same month last year.

Germany’s inflation rate is calculated based on the consumer price index (CPI), which measures the average price change of all goods and services on sale in the federal republic - everything from bread and rent to a haircut - in comparison to the same month of the previous year.

For January 2024, the provisional core inflation rate in Germany was +3,4 percent. The core inflation rate calculation excludes the changing cost of food, energy, tobacco and alcohol since these goods are much more vulnerable to cost fluctuations. 

Both the CPI rate and the core inflation rate will now be used by the European Central Bank to reassess if interest rates should be cut.

Inflation would have fallen further with energy price cap

Since it was scrapped by the German government on December 31, 2023, January marked the first month without the country’s energy price cap (Gaspreisbremse), introduced to keep home utilities affordable after Russia invaded Ukraine.

The policy capped energy prices at a maximum of 12 cents per kilowatt hour of gas and 40 cents per kilowatt hour of electricity for 80 percent of a household’s average annual usage. The difference is then paid out by the German government.

According to an analysis by Deutsche Bank, Germany’s inflation rate for January 2024 would have fallen even further if the Gaspreisbremse were extended. Other policies adopted in 2024; the decision to increase tax on CO2 which made the cost of petrol that uses fossil fuels more expensive, and a return to the 19 percent VAT rate on restaurant food, also kept the inflation rate a little higher.

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