Germany’s inflation rate rose faster than expected in December, preliminary data showed Monday, as consumer price rises accelerated towards the end of the year.
The annual inflation rate in Europe’s largest economy was expected to have reached 2.6 percent last month, federal statistics agency Destatis said.
The indicator was up from November’s rate of 2.2 percent.
The December reading was also higher than the 2.4-percent rate predicted by analysts surveyed by financial data firm FactSet.
After dipping below the European Central Bank’s two-percent target, inflation has risen again in the past three months.
Inflation would “continue to accelerate before slowing again in the course of the year”, said ING bank analyst Carsten Brzeski.
The rise was due mainly to “less favourable” base effects related to the price of energy, widely anticipated by observers, Brzeski said.
Further increases in wages while the energy-price effect peters out could, however, keep inflation at “slightly too high a level” for a little longer, he said.
With the German economy looking likely to have recorded another year in recession in 2024, rising consumer prices raised “the spectre of stagflation”, Brzeski said.
While December’s inflation reading was higher than anticipated, it was still far below the highs seen in late 2022 as the war in Ukraine and the exit from coronavirus pandemic restrictions drove consumer prices up.
The ECB only started to reduce interest rates last year after raising them rapidly to throttle the inflation surge.
At the bank’s last rate-setting meeting in December, policymakers signalled confidence that inflation was headed back towards its target over the coming months.
The ECB looked set to follow up recent interest rate cuts with new reductions in the new year as the European economy showed signs of weakness.
