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Friday, Jun 20, 2025

Near 50-year high German inflation strengthens case for larger ECB rate rise

Near 50-year high German inflation strengthens case for larger ECB rate rise

German inflation rose to its highest level in almost 50 years in August, beating a high set only three months earlier, data showed, strengthening the case for the European Central Bank to go for a larger basis-point interest rate increase next month.
Consumer prices, harmonised to make them comparable with inflation data from other European Union countries (HICP), increased by 8.8% on the year, following an unexpected 8.5% rise in July, the federal statistics office said on Tuesday. The reading was in line with a Reuters poll of analysts.

The rise comes despite government measures meant to stifle inflation, including cheaper public transit tickets and a fuel tax cut, that are set to end on Aug. 31. Without any follow-up measures, analysts predicted inflation in Europe's largest economy could reach double digits before the end of 2022.

"Judging by the current inflation rate and what is still to come, the ECB should actually launch a jumbo interest rate step," said VP Bank chief economist Thomas Gitzel.

The ECB raised its deposit rate by 50 bps to zero in July and a similar move was expected for September until recently, but a host of policymakers made the case for discussing a 75 bps increase as well.

At 8.9%, euro zone inflation is already more than four times the ECB's 2% target and could exceed 10% in the coming months. read more

German inflation rose to 8.7% in May, which had marked the first time since winter 1973/1974 - when the first oil crisis led to a new and difficult-to-tame inflationary cycle - that inflation had been so high, the office said at the time. read more

Energy price increases as a result of the war in Ukraine have been the primary driver behind higher inflation; August's energy prices were 35.6% higher than the same month last year.
Comments

Oh ya 3 year ago
Germany has a plan to keep its people warm this winter, after you prove you burnt all your furniture they will let you take some of the black forest. They did not name it black forest years ago for nothing, the ashes will be black. Europe has decided that it is going to keep punching themselves in the nuts until Russia surrenders. Power is only 85 cents a kilowatt hour compared to the US at about 16 cents. Nice they are willing to for go showers and a warm house for the US sanctions as Americans are warm and comfortable. You can't fix stupid

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