German Inflation Accelerates to Record as ECB Weighs Next Hike
German inflation quickened to an all-time high on soaring energy prices, bolstering calls for a jumbo interest-rate increase when the European Central Bank meets next week.
(Bloomberg) — German inflation quickened to an all-time high on soaring energy prices, bolstering calls for a jumbo interest-rate increase when the European Central Bank meets next week.
Consumer prices in Europe’s biggest economy, calculated under European Union harmonized standards, jumped 8.8% from a year ago in August, matching the median estimate in a Bloomberg survey of analysts.
Food and energy costs led the advance, Germany’s statistics office said Tuesday, though their impact was partially offset by temporary government aid, including a fuel rebate and ultra-cheap public transport.
Those measures expire soon, suggesting price growth will accelerate further. Euro-area inflation data due Wednesday are expected to show another record increase of 9%.
The Bundesbank sees Germany’s number hitting about 10% in the final quarter of 2022 and considers the outlook highly uncertain due to the “unclear situation” on commodity markets — a consequence of Russia’s war in Ukraine.
That’s the main concern for the continent as a whole, with the ECB facing not only the challenge of unprecedented inflation but also the resulting cost-of-living squeeze that some analysts say has already sparked a recession in the 19-nation bloc.
While ECB policy makers are expected to raise rates by a half-point on Sept. 8, some have floated the idea of a bigger 75 basis-point hike akin to the more aggressive steps taken of late by the Federal Reserve.
There was positive news Tuesday as European energy prices fell on European Commission plans to take urgent action. While trading remains volatile, countries in the region have also succeeded in filling natural-gas-storage facilities before the winter heating period.
Elsewhere, Spain reported a slowdown in inflation from July’s record high. Economy Minister Nadia Calvino said that trend “should continue” in the coming months, though analysts warned that any retreat will only be gradual.