Germany: ‘Jump’ 8.8% and a record for inflation

Inflation in Germany rose to a record on rising energy prices, boosting calls for a big rate hike at the European Central Bank’s meeting next week.

In particular, consumer prices in Europe’s largest economy, which are calculated according to the European Union’s harmonized standards, jumped 8.8% year-on-year in August, according to average estimates in a Bloomberg survey.

Food and energy costs led the rise, the country’s statistics office said on Tuesday, although their impact was partly offset by temporary government aid, including a fuel discount and ultra-cheap public transport tickets.

The Bundesbank sees German inflation reaching around 10% in the final quarter of 2022 and sees the outlook as highly uncertain due to the “uncertain situation” in commodity markets due to Russia’s war in Ukraine.

This is the main concern for Europe as a whole, with the ECB facing not only the challenge of unprecedented inflation, but also the resulting impact on the cost of living that some analysts say has already caused a recession in the eurozone.

While ECB officials are expected to raise interest rates by half a point on September 8, some have argued for the possibility of a bigger increase of 75 basis points, similar to the more aggressive steps taken by the US Federal Reserve (Fed).

There was some positive news on Tuesday as European energy prices fell amid plans by the European Commission to take emergency action. While trading continues to be highly volatile, the countries of the region seem to be achieving the goal of filling natural gas storage facilities before the winter heating season.

Meanwhile, Spain announced a slowdown in inflation from July’s record. Economy Minister Nadia Calvino said the trend was “expected to continue” in the coming months, although analysts warned that any retreat would be gradual.