(Jan 30): German inflation accelerated slightly after Europe’s largest economy recorded surprisingly strong expansion at the end of last year.
Consumer prices rose an annual 2.1% in January — up from 2% in December — the statistics office said on Friday. Analysts had predicted an unchanged reading.
The report comes less than a week before the European Central Bank (ECB) meets for the first time this year. While officials insist monetary policy remains in a “good place,” they’re sure to discuss the eurozone economy’s outperformance in the fourth quarter, as well as the recent rally in the euro.
Despite still-elevated uncertainty over trade and Russia’s war in Ukraine, euro-area inflation is settling at 2%. Expectations among consumers for price gains over the next 12 months held steady in December, the ECB said earlier on Friday.
At the same time, economic growth has been firmer than expected. Figures for Germany, Italy and Spain — and the region as a whole — all surpassed estimates, with the former expanding 0.3%.
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Against that backdrop, the ECB has no reason to change interest rates any time soon, Bundesbank president Joachim Nagel said in a recent interview, adding that long-term predictions are difficult to make.
Even so, economists are convinced that borrowing costs are locked at their current level through at least the end of 2027, with minority calls for a hike in 2026 receding.
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