Germany Inflation Eases to 2.6% in May, Matching Forecasts

Germany's annual inflation rate fell to 2.6% in May, down from 2.9% in April and in line with consensus estimates, the Federal Statistical Office said Monday. The reading, based on preliminary data from six states, marks the first decline in three months and keeps the euro zone's largest economy on a disinflation path that the European Central Bank has been watching closely.

Services inflation, the stickiest component, held at 3.9% for a second month. Energy prices fell 1.1% year-on-year after a 1.2% drop in April. Food inflation ticked up to 1.0% from 0.5%, a modest acceleration that economists said reflected base effects rather than renewed pressure.

The headline print matters for the ECB's next rate decision on June 6. A string of upside surprises in euro-area services inflation had pushed some policymakers to argue for caution. Germany's May data – the first major euro-zone release of the month – offers no fresh reason to delay a cut. Money markets are pricing a quarter-point reduction to 3.75% with roughly 80% probability, little changed after the release.