- Germany's preliminary April harmonized CPI rose 2.9% year-on-year, missing the 3.1% estimate.
- The reading suggests inflation pressures are easing but remain elevated, keeping the ECB cautious.
- Services and energy components continue to drive prices, with core inflation still sticky.
Germany's annual harmonized index of consumer prices (HICP) rose 2.9% in April from a year earlier, according to preliminary data released Wednesday by the Federal Statistics Office. The figure came in below the 3.1% forecast by economists, signaling a slight easing in price pressures from March's 3.0% reading.
The data, which excludes volatile food and energy prices, showed core inflation remained sticky, driven by services and rent costs. Energy prices, while still a factor, were less of a driver than in previous months as base effects from the war in Ukraine faded.
"The modest undershoot of expectations could give the ECB some breathing room as they deliberate next steps," said a Frankfurt-based economist. "But we're not out of the woods yet. Services inflation is proving resilient."
The ECB has been closely watching German inflation as it considers the timing of its first rate cut. Most policymakers have signaled a move in June is likely, but the pace of further easing remains uncertain.
According to people familiar with the matter, ECB staff are updating their internal inflation forecasts, with some arguing that the risks to the inflation outlook are now more balanced.
"The ECB's next move will depend on whether services inflation shows signs of moderating," said another economist. "This German print is a step in the right direction, but not a decisive one."
--Correction: An earlier version of this article misstated the March HICP figure. It was 3.0%, not 2.9%.