The European Central Bank will probably have to raise interest rates even more than originally expected. Inflation in Europe’s largest economy is still rising and has reached an almost 50-year high.
The rate of consumer price inflation in the Federal Republic of Germany accelerated markedly further in May. The annual inflation rate measured by the harmonised index of consumer prices (which corresponds to Eurostat’s methodology) reached 8.7 % in May. This is 0.9 percentage point more than in April. According to the national methodology, May inflation rose by half a percentage point to 7.9 % compared to April.
Increase of energy prices
Month-on-month, prices in Germany increased by 0.9 percent (according to the national methodology) and 1.1 percent (according to the Eurostat methodology). The most significant contributor to the acceleration in the price increase was energy, whose prices are 38.3 % higher year-on-year. This was followed by food, which rose in price by more than 11 percent year-on-year.
An oil shock
Germany’s inflation rate is the highest since 1974, when the first oil shock hit Europe’s largest economy. According to experts, a further acceleration of inflation in Germany may thus have an impact on the upcoming decision of the European Central Bank on how quickly to raise its key interest rates.