Written by Maria Martinez
BERLIN (Reuters) – Inflation fell in six economically important German states in March, provisional data showed on Tuesday, suggesting that national inflation will continue its downward trajectory.
Economists will be paying close attention to domestic inflation data later in the day, as Germany will release the data a day before Wednesday's release of euro zone inflation data.
Klaus Bystesen, chief eurozone economist at Pantheon Macroeconomics, said: “The overall message from the data from Germany, France, Italy and Spain is that headline inflation in the eurozone is well below consensus this week. ” he said.
Inflation in Germany's most populous state, North Rhine-Westphalia, 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 to 2.8% from 3.5%, in Saxony to 2.5% from 3.0%, and in Baden-Württemberg to 2.3% from 2.7%. The state of Hesse rose from 2.1% to 1.6%.
Economists polled by Reuters predicted Germany's harmonized inflation rate would be 2.4% in March, down from 2.7% in February.
The Ifo Institute said on Tuesday that expected stock prices for German companies in March have fallen to a three-year low, and that inflation is expected to fall below the European Central Bank's target in the coming months.
The European Central Bank (ECB) has implemented the euro's biggest interest rate hike in its history in a bid to bring inflation down from double digits.
ECB President Christine Lagarde said in March that inflation in the euro zone would continue to fall, while economic growth would start to accelerate by the end of the year.
Franziska Palmas, senior European economist at Capital Economics, said: “The decline in CPI inflation in major German states in March largely confirms that harmonized inflation in Germany and the euro area will be lower than expected in March. ” he said.
Eurozone inflation is expected to remain unchanged from last month at 2.6% in March, according to a Reuters poll of economists.
A growing number of ECB policymakers support a rate cut, with the June Governing Council meeting becoming the most likely time for action, although a Governing Council meeting is also set to be held this month.
Palmas said ECB policymakers would be happy if eurozone inflation were lower than expected. “But we still think we will wait until June to cut rates.”
(Reporting by Maria Martinez; Editing by Sonali Paul and Clarence Fernandez)
