German inflation eases to 2.8% in October as fuel tax cut brings relief

German inflation eased more than expected in October, as lower fuel prices following a government tax reduction helped moderate consumer price growth, offering some relief amid persistent energy-related inflationary pressures.

Inflation, measured by the European Union-harmonised consumer price index (HICP), slowed to 2.8 per cent year-on-year in October, according to preliminary data released by Germany’s federal statistics office on Friday. Economists polled by Reuters had expected inflation to come in at 3.1 per cent, compared with 3.3 per cent in September.

The slowdown was partly driven by a moderation in energy price growth. Energy prices rose 12.2 per cent year-on-year in October, easing from a 14.9 per cent increase in September.

Core inflation, which excludes volatile food and energy prices, also declined to 2.1 per cent from 2.4 per cent in the previous month, indicating a broader easing in underlying price pressures.

The improvement comes after Germany introduced a fuel tax reduction at the beginning of October. The measure, which is scheduled to remain in place until the end of the year, has resulted in a modest decline in fuel prices.

However, inflationary pressures across the euro zone remain a concern. The German data comes ahead of the euro zone’s inflation figures, due on Wednesday. Economists surveyed by Reuters expect inflation across the currency bloc to rise to 3.9 per cent in October from 3.8 per cent in September.

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The inflation data also comes a day after the European Central Bank (ECB) kept interest rates unchanged on Thursday but signalled the possibility of another rate hike in December.

The central bank warned that high and rising energy costs were adding to inflation risks, highlighting the challenge of balancing price stability with economic growth as energy-related pressures persist across the region.