German inflation hit another all -time high. This could prompt the need for the European Central Bank to change its crisis -era stimulus policy after the same thing happened for Spain.
German inflation has exceeded the expectations of economists and this is driven by soaring energy and food costs. Based on data released on Monday showing consumer prices in Europe’s largest economy jumped 8.7% from a year ago in May. On the other hand, economic analysts forecast an increase of only 8.1%.
The report was released 10 days before an important ECB meeting at which officials prepared to announce the conclusion of large -scale asset purchases and also to confirm plans for an interest rate hike in July for the first time in more than a decade. some policymakers even argue that there is a probability of an increase of half a percentage point.
Inflation figures increase pressure on the government as households become increasingly overcrowded. Finance Minister Christian Lindner earlier Monday called the fight against price hikes a “top priority” while supporting a broad termination of fiscal policy.
Lindner added that inflation is a major economic risk and it must be addressed so as not to have a major impact on the economy.
ECB policymakers including President Christine Lagarde have expressed similar concern that the risk of very high price growth could take root and impact consumption at a time when the industry is experiencing protracted supply difficulties and uncertainty about energy supply following Russia’s invasion of Ukraine.
The ECB’s decision in June will be guided by new economic projections that are likely to show price pressures in the european region as a whole remain above the 2% target in 2023 and 2024. Data for May will be released on Tuesday.
Spain in early Monday reported an unexpected to unexpected rise in inflation to a reading of 8.5% despite government assistance including fuel subsidies and a minimum wage increase.
