Bloomberg: Germany's inflation hits double digits for first time since euro introduction

  • September 29, 2022
Bloomberg: Germany's inflation hits double digits for first time since euro introduction

Inflation in Germany reached double digits for the first time since the euro was introduced more than 20 years ago, rising more than expected after the end of temporary government support measures and a worsening energy crisis in Europe.

Consumer prices rose 10.9 percent in September from a year earlier, surpassing August's 8.8 percent increase, the Federal Statistics Office said Thursday. That was higher than the 10.2 percent that economists polled by Bloomberg had expected.

The surge in inflation was expected as Germany rolled back summer rebates on public transportation and fuel. But the extent of the acceleration will worry the European Central Bank, which is struggling to rein in rising prices, whose stubborn rise will break another record when data are released Friday.

The German government announced Thursday that it is going to cap gas prices, which could curb future inflation rates. The administration of German Chancellor Olaf Scholz will borrow at least 150 billion euros to implement the initiative, according to knowledgeable sources.

German inflation data raise the risk of exceeding the median forecast for the eurozone of 9.7 percent in a Bloomberg survey of economists, despite the surprise of Spain, which reported a sharper-than-expected slowdown in September.

In any case, ECB officials are already planning another significant interest rate hike after this month's historic 75-basis-point hike, which echoed the Federal Reserve's action.

ECB head Christine Lagarde said rates will be raised in the next few meetings, and Vice President Luis de Guindos said Thursday that policymakers should do all they can to rein in inflation.

Three Governing Council members from the Baltic region, where price increases have exceeded 20 percent, are in favor of repeating September's three-quarter-point rate hike on Oct. 27. Their ECB counterparts from Austria, Slovakia and Slovenia feel the same way. Money markets are now estimating the likelihood of a 1.5% hike in the deposit rate from 0.75% to 60%.

The ECB's efforts are complicated by a rapidly deteriorating outlook for the 19 eurozone countries as Russia further cuts energy supplies ahead of winter.

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