German inflation fall in February offers more room for ECB easing

German inflation unexpectedly fell in February, the statistics office said on Friday, pointing to a downward revision of Eurozone figures that would back further policy easing by the European Central Bank.

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German inflation fell to 2.6 percent in February, revising down preliminary data which had showed annual inflation, harmonised to compare with other European Union countries, was flat in February at 2.8 percent.

“This is good news for the ECB,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “Caution is nevertheless advised,” he added.

That was because the relatively low rise in inflation was based on a below-average increase in goods prices, de la Rubia said. However, these could rise in the course of a trade war if the EU defends itself more strongly against imports from the US and China, he said.

Inflation fell to an annual rate of 2.4 percent in the eurozone in February, according to a first estimate from the EU's statistics agency.

The lower German inflation rate would now suggest Eurozone inflation fell to 2.3 percent in February, according to Pantheon Macroeconomics estimates. Final data will be published on Wednesday.

In Germany, the increase in food prices intensified in February and above-average increases in service prices, in particular, continued to drive up inflation, the office said. By contrast, energy prices had a downward effect on inflation.