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German Inflation Remains Above ECB Target

German Inflation Remains Above ECB Target

Germany’s harmonized inflation exceeded the European Central Bank’s target of ‘below, but close to 2 percent’ in May, flash data from Destatis showed on Monday.

Harmonized consumer prices grew 2.4 percent year-on-year in May, faster than the 2.1 percent increase in April. The rate came in line with economists’ expectations and was the highest since 2018.

At the same time, consumer price inflation accelerated to 2.5 percent from 2 percent in April. The rate was above forecast of 2.3 percent.

With headline inflation on the rise, the ECB’s attempt to avoid the taper conversation will become more and more complicated, Carsten Brzeski, an ING economist said. However, German headline inflation could eventually range between 3 percent and 4 percent in the second half of this year.

As temporary effects are largely responsible for higher inflation, noticeably lower inflation rates can be expected again for the coming year, Marco Wagner, an economist at Commerzbank, said. In sum, the inflation rate should average 2.5 percent in 2021, but then fall to 2 percent next year.

On a monthly basis, the harmonized index of consumer prices gained 0.3 percent as expected in May. The consumer price index was up 0.5 percent, bigger than the expected rate of 0.3 percent.

The material has been provided by InstaForex Company – www.instaforex.com