Germany’s Inflation Accelerates to Fastest Pace in 10 Months

(Bloomberg) -- German inflation accelerated to the fastest pace in 10 months as food costs picked up, a comforting sign for the European Central Bank as it attempts to rekindle price growth while contemplating the coronavirus threat.

While positive, the news is likely to be overshadowed by mounting concerns about the fallout from the outbreak, which is now starting to spread across Europe. Economic growth in Germany might well be lower than the Bundesbank predicted for 2020 as the epidemic compounds trade uncertainties, President Jens Weidmann said on Friday.

The German inflation rate climbed to 1.7% in February, slightly above economists’ expectations for 1.6%. That follows a report earlier on Friday showing unemployment fell for a second month, highlighting continued resilience of the labor market to a manufacturing slump.

A number of ECB officials including President Christine Lagarde said in recent days that they are watching closely the spread of the virus, but don’t see the need to respond just yet. At the same time, Chief Economist Philip Lane said on Thursday that easing measures must be sufficiently pre-emptive to avert a deanchoring of inflation expectations.

The latest data for inflation in the euro area will be released on Tuesday.

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Craig Stirling

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