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German inflation unexpectedly accelerates to 2.2% on energy

Sep 27 2018 14:30
Xiaoqing Pi, Bloomberg

German inflation unexpectedly accelerated to a four-month high, suggesting the rate in the eurozone will rise further above the European Central Bank’s (ECB) goal.

Consumer prices rose an annual 2.2% in September, exceeding the median estimate in a Bloomberg survey and the 1.9% reached in August. Eurostat will release data for the 19-nation eurozone on Friday.

Inflation in Germany has been slightly stronger than in the currency bloc in recent years, supported by a strong labour market and robust domestic growth. The latest pick-up - boosted by rising energy costs - is likely to add to discontent in Europe’s largest economy about continuously loose monetary policy and amplify calls for higher interest rates.

Governing Council member Ewald Nowotny of Austria has already said the ECB should consider tightening policy sooner than originally planned. While the ECB expects to end asset purchases in December, officials have signalled borrowing costs won’t rise until after the summer of 2019.

Any demands for a faster exit from unconventional stimulus are likely to be countered by increasingly uncertain economic prospects. Germany slashed its growth forecasts on rising protectionism, and the World Trade Organisation downgraded its view of global commerce.

The ECB acknowledged the threats when it presented updated economic projections in September, even though it maintained risks to the growth outlook are still broadly balanced and confidence in inflation has improved.

Before the German numbers, eurozone inflation was forecast to accelerate to 2.1%. The ECB’s goal is to keep price growth just below 2% over the medium term.

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germany  |  inflation  |  economy


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