Budgeting Economy News Extra Latest News Planning & Economic Development Statistics

German Inflation Hits 6.0% In November, Highest In Decades

German consumer price inflation rose further in November to hit another record high, thereby increasing pressure on the European Central Bank (ECB) to react.

Preliminary data on the country’s inflation released on Monday by the Federal Statistics Office showed that Consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose 6.0% year-on-year following an increase of 4.6% in the preceding month.

The reading was the highest rate recorded since January 1997, when the EU-harmonized series commenced.

According to the FOS, the national consumer price index (CPI) rose by 5.2% year-on-year, which was the highest rate since June 1992.

Reacting to the CPI surge, ECB board member, Isabel Schnabel, told ZDF television the rise did not come as a surprise to the central bank, noting, however, that although its earlier forecasts had not predicted such a strong one.

According to him, the central bank believes inflation peaked in November, meaning it would be premature to raise rates as price increases look likely to slow gradually next year.

This is even as preliminary euro zone inflation data due on Tuesday is expected to show a rise to 4.5% in November from 4.1% in the previous month.

Analysts have attributed the recent surge in inflation to a mix of several factors, including base effects, higher energy prices, a pandemic-related temporary VAT rate in the previous year and material shortages in the course of the recovery.

In his remarks, VP Bank analyst, Thomas Gitzel, said: “Although inflation rates will remain at a relatively high level in the coming months, a downward trend should be discernible.

“If there are no second-round effects, the ECB target of 2% should already be reached again by mid-2022”, Gitzel added.

Also reacting to the spiking consumer prices, Commerzbank economist, Joerg Kraemer, expressed serious concern about the latest figures, describing it as a worrying sign that seasonally adjusted consumer prices rose unusually strongly on the month.

He noted that the prices were now increasing on a broader front and no longer just about energy and some goods, particularly affected by the coronavirus pandemic

While agreeing that inflation is likely to fall again after the turn of the year due to some special factors, Kraemer said there was too much money circulating in the euro zone because of high budget deficits and the ECB’s bond purchases.

To contain the rising prices, the economist advised that “the ECB should take its foot off the accelerator, stop its bond purchases and end the negative interest rate policy.”

Spread the love

Leave a Reply

Your email address will not be published.