German Inflation Surges to Highest in More Than Year on War

clwojuv{[wa4il7ey5njm}mp_media_dl_1.png DestatisArticle content(Bloomberg) — German inflation accelerated sharply in March after the Iran war boosted energy costs, supporting the idea that the European Central Bank will have to raise interest rates.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentConsumer prices rose 2.8% from a year ago — faster than February’s 2% advance — the statistics office said Monday. That’s the highest level in more than a year and matches the median estimate in a Bloomberg survey.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentEnergy costs soared by 7.2% — the first increase since December 2023. A gauge stripping out volatile items like fuel and food was unchanged at 2.5%.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentWith the fighting in the Middle East now in its fifth week, the effect of costlier oil and gas is showing up in European prices and consumers’ views on where inflation is headed. While ECB President Christine Lagarde has vowed to act decisively and swiftly if needed, officials say they won’t rush as they assess the full consequences.Article contentMoney markets anticipate a rapid reaction and are leaning toward a rate hike already at April’s meeting. They’re pricing as many as three moves over the whole year.Article content“The rise in inflation in March is just the beginning — higher energy costs will eat their way through supply chains in the coming months, unless the war ends quickly,” Commerzbank Chief Economist Joerg Kraemer said. “The ECB is coming under increasing pressure to raise interest rates.”Article contentGermany’s numbers follow a jump in Spanish inflation, to 3.3%, though the increase fell short of analyst estimates. Figures from France and Italy are due Tuesday, along with a reading for the euro zone that’s set to hit 2.6% — the highest since July 2024.Article contentArticle contentThere are signs in Germany that some don’t expect a speedy resolution to the energy issues, with a survey by the Ifo institute published earlier Monday showing significantly more firms are preparing to raise prices. A separate European Commission poll put inflation expectations among consumers at their highest level since 2022.Article contentWhat Bloomberg Economics Says…Article content“The surge in energy prices after the start of the Iran war halted Germany’s disinflation and could push average inflation toward 3% this year, versus a pre-war forecast of sub-2%. With a less tight labor market than during the 2022 energy crisis, pass-through to core inflation may remain modest, and core price growth should ease further this year.”Article content—Martin Ademmer. Click here for full REACTArticle contentPolicymakers have a “duty” to avoid such beliefs becoming entrenched, French central-bank chief Francois Villeroy de Galhau told La Stampa. Greece’s Yannis Stournaras warned that a lengthier war could trigger stagflation and a deviation from the ECB’s baseline scenario, which envisages prices rising in line with the 2% target over the medium term.Article contentThe ECB has been criticized for reacting too slowly to the energy shock that followed Russia’s invasion of Ukraine four year ago. Inflation spiraled past 10% and policymakers were forced to hike borrowing costs aggressively to bring it back down. Article contentWhile the root cause of the current crisis — a surge in energy prices — is similar, officials stress that the euro zone isn’t as vulnerable because demand is weaker, the labor market is solid and monetary-policy settings are more neutral.Article content—With assistance from Harumi Ichikura, Joel Rinneby and Mark Schroers.Article content(Adds Bloomberg Economics.)Article contentTrending Posthaste: Gold's fall from grace could be worse than markets expect News 'A new floor for oil': Prices expected to be higher for longer, potentially unlocking new spending Energy Subscriber only. How a Buddhist monk's advice helped this Canadian philanthropist amass a fortune Subscriber only High Net Worth Oil rises to US$117 as Iran war escalates with Houthi attacks on Israel PMN Business Markets often first to punish then reward the investments that ultimately matter during supply shocks Investor Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Posthaste: Gold's fall from grace could be worse than markets expect News 'A new floor for oil': Prices expected to be higher for longer, potentially unlocking new spending Energy Subscriber only. How a Buddhist monk's advice helped this Canadian philanthropist amass a fortune Subscriber only High Net Worth Oil rises to US$117 as Iran war escalates with Houthi attacks on Israel PMN Business Markets often first to punish then reward the investments that ultimately matter during supply shocks Investor