In June, inflation in Germany has again accelerated unlike the sharp drop in Spain, according to data from German statistics office Destatis. Inflation in the first economy of the Eurozone recorded a growth, in the month of June 6,4% on an annual basis compared to 6.1% in the previous month. It also goes up on a monthly basis (+0,6%) compared with a 0.1% decline in the previous month. Numbers that confirm the ECB’s monetary tightening, announced at the Sintra Forum.
Germany, inflation rises. Down in Italy and Spain
Inflationary pressures driven by the effect of the concessions offered by the Berlin government still in 2022 to help citizens in economic difficulty, especially the ultra-cheap train ticket at the price of 9 euroshas driven the growth of consumer prices to 6.8% in June.
In Spain, meanwhile, as we have already anticipated, headline inflation has weakened significantly on its way back below the 2% target of the ECB, to1,9% a/a. Data from Italy also show a drop in inflationary pressures in June, al 6,4% compared to 7,6% a/a in the previous month. But despite the decline, the target of the Frankfurt Institute remains very limited.
Inflation Spain
Data from various Eurozone countries show that price trends in the region continue to vary markedly, almost a year into the ECB’s interest rate hike cycle. The Frankfurt institute has already confirmed that it will continue with the hikes at its July meeting, but today’s numbers also open up the possibility for a hike in September.
Inflation in Germany
Now the focus of investors, to better understand what the next moves on ECB rates could be, remains on Eurozone inflation due out tomorrow, Friday 30 June at 11:00.
“Over the past year, workers have been hit by the inflationary shock, witnessing a sharp decline in real wages, which is triggering a sustained wage recovery process,” said ECB President da Sintra, Christine LagardeAnd. “This is pushing up other measures of underlying inflation that capture more domestic price pressures.”
Analysts continue to price in a terminal rate related to the ECB’s deposit rate at 4%. Which would mean at least two more hikes of 25 basis points, possibly in the July and September meetings.
According to Bloomberg economist opinion Martin Ademmer: “Inflation in Germany rose sharply in June and we estimate that core inflation jumped even bigger and could rise further over the summer. This is mainly due to base effects and weight changes in the consumption basket, so still bad news for the ECB. We expect two more increases by 25 basis points a July and Septemberbefore the hike cycle comes to an end.”
While according to what the Bundesbank in un report, “underlying price pressures are likely to remain very elevated for now. This carries the risk that those who set wages and prices will increasingly lean towards higher rates of inflation. The decline in inflation could therefore be slower than expected”.
ECB projections this month showed inflation slowing by an average of 2.2% in 2025, but the Bundesbank’s forecast for Germany over the same period stands at 2.7%.