German Inflation Surges to 2.9% in December, Exceeding Expectations
The German economy has been dealt a surprise blow as inflation rates soared to 2.9% in December, surpassing analyst forecasts of 2.6%. This marks the third consecutive month that German inflation has exceeded the European Central Bank’s 2% target.
A Closer Look at the Numbers
According to the German statistics office, Destatis, the harmonized consumer price index rose by 0.7% on a monthly basis. Core inflation, which excludes food and energy costs, inched higher to 3.1% in December, up from 3% in the previous month. Services inflation also saw a slight increase, reaching 4.1% compared to 4% in November.
Experts Weigh In
Carsten Brzeski, global head of macro at ING, attributes the surge in inflation to less favorable energy base effects. “The summer celebrations over successfully conquering the inflation monster were premature,” he notes. Brzeski predicts that inflation will continue to stick at slightly too high a level, driven by the petering out of favorable energy base effects and increasing wages.
Political Uncertainty Looms
This latest data comes at a time of political uncertainty in Germany, with federal elections scheduled for February 23. The country’s now former ruling coalition broke apart in November, leading to a series of constitutionally mandated steps to clear the path for polls.
What’s Next?
As Germany navigates this period of political uncertainty, the latest inflation data will likely play a significant role in shaping the country’s economic policy. With inflation rates exceeding expectations, it remains to be seen how the new government will address this issue and its impact on the German economy.
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