German inflation rises to 6.4% in June

Published On: June 30, 2023 08:32 AM NPT By: AFP/RSS

FRANKFURT, Germany, June 30: German inflation climbed in June after several months of deceleration, official data showed Thursday, complicating the picture for the European Central Bank as it battles stubbornly high prices in the eurozone.

The annual inflation rate in Europe's biggest economy rose to 6.4 percent, up from 6.1 percent in May, according to preliminary figures realeased by the federal statistics office Destatis. Analysts surveyed by financial data firm FactSet had expected a June reading of 6.3 percent.

The increase was due to unfavourable base effects compared with June 2022, when inflation dipped because the German government launched a nine-euro summer travel ticket and reduced fuel taxes to offset soaring energy costs in the wake of the Ukraine war. Analysts said the first increase in Germany's inflation rate this year was only a temporary setback. "Base effects temporarily stalled the decline in the inflation rate," said KfW chief economist Fritzi Koehler-Geib.

"Disinflation should gain more momentum after the summer," agreed ING bank economist Carsten Brzeski. Rapidly falling energy prices have helped slow inflation across the 20-nation eurozone in recent months, which peaked at 10.6 percent last October. But at 6.1 percent in May, it remains more than three times above the ECB's target.

The central bank has raised its key interest rates by an unprecedented 4.0 percentage points since last July in a bid to rein in prices, and president Christine Lagarde has said another hike next month was "very likely".

The latest figures out of Germany will do little to ease the ECB's worries about persistent inflation, but there was better news out of other major eurozone economies. Spanish inflation slowed sharply to 1.9 percent in June, thanks to lower fuel, electricity and food prices, preliminary data showed Thursday. In Italy, inflation eased to 6.4 percent year-on-year from 7.6 percent in May, according to data released on Wednesday.

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