Development of the Inflation Rate
The inflation rate in Germany fell to 2.1 percent in April 2025, the lowest value since October 2024. This development is mainly attributed to declining energy prices, which have decreased by 5.4 percent compared to the previous year. In contrast, food prices remained high, increasing by 2.8 percent. Services also became more expensive, by 3.9 percent, which is above the overall inflation index.
Effects on Savers and Investors
Declining consumer prices lead to an increase in purchasing power, as consumers’ money stretches further. This can positively influence consumption and strengthen the economy. The European Central Bank (ECB) may take the declining inflation as an opportunity to reconsider its interest rates. A reduction could encourage investments, while maintaining rates could serve to stabilize inflation.
Declining inflation rates increase the attractiveness of bonds and other fixed-income securities, as the purchasing power of money remains intact. However, lower interest rates could reduce bond yields, making them less attractive.
Core Inflation
Core inflation, which excludes food and energy prices, stood at 2.9 percent in April 2025. This indicates that there is still some price pressure in the economy that is not solely attributable to energy prices.
Conclusion
The declining inflation rate in Germany could have both positive and negative impacts on savers and investors. While purchasing power increases, central bank policy and the attractiveness of various investment forms could be influenced. The development of core inflation shows that there are still challenges in price formation that need to be monitored.