In a surprise move, German inflation surged higher in February, causing markets to take notice. German consumer prices increased in February, adding more than analysts anticipated. On Wednesday, new data showed that stubborn price pressures persist in the country. Considering that France also has the same problem, the European Central Bank might decide to continue its rate hikes in the coming months. That possibility becomes stronger with every new report.
EU-harmonized prices jumped by 9.3% last month compared with February, a year earlier. According to preliminary data from the federal statistics office, inflation beat economists’ expectations of a 9.0% surge. The number came out slightly higher than January’s 9.2% hike.
Moreover, the office reported that prices rose by 1.0% compared to January. That figure also beat analysts’ forecasts of a 0.7% month-on-month rally. Germany isn’t the only one suffering from high inflation, though. Spain also announced an unexpected surge in prices, along with France. Those two countries represent one of the biggest economies in the eurozone, with Germany claiming the title at the top of the list.
The European Central Bank has already hiked its interest rates by 300 basis points since July 2022. However, the bank hinted that another oversized increase might be coming in March. Still, some policymakers think that more measured action might be in order, considering that inflation lowered from its peak hit in October.
On Wednesday, Bundesbank President Joachim Nagel stated that the recent energy price plunge might help to hinder inflation in the near term. But they won’t have an impact in the medium term.
What is the Federal Reserve planning to bring down inflation?
The U.S. central bank will likely deliver additional rate hikes in the coming months. New data showed that its economy is growing better than analysts expected. Thus far, aggressive interest rate hikes haven’t managed to push it into a recession.
Considering this news and the fact that inflation remains high in the country, economists bet on further rate increases from the Fed.
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