German Inflation Breaks Through 2% for First Time Since 2019

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Germany’s inflation rate rose above 2% for the first time in two years, boosted mainly by energy costs.

Consumer prices also increased sharply in Spain -- by 1.9% from a year earlier -- and are expected to pick up in France and Italy. A euro-area report due on Friday is set to show the rate reaching 1.5%, the highest since 2019.

While some analysts foresee a new era of higher inflation after the pandemic, fueled by pent-up demand and a glut of savings boosted by massive fiscal support to households, the European Central Bank predicts any pickup will be temporary.

It has noted that price gains this year have largely reflected the end of one-time effects, such as the slump in oil prices and temporary tax cuts. It also says changes to the composition of the spending baskets used to calculate consumer price growth are distorting underlying trends.

The institution -- which has fallen short of its goal of inflation below, but close to, 2% for years -- reckons price pressures will stay muted in the medium term amid economic slack and job uncertainty. Core inflation in the 19-nation region is still running below 1%.

©2021 Bloomberg L.P.

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