Driven by an oil surge that is hiding sustained weakness in underlying price pressures in the months ahead, the pace of German inflation more than doubled last month. The escalation takes inflation in Europe’s largest economy near to the European Central Bank’s target of 2.00%, providing reasons for a few officials who are pushing for a measured exit from unconventional stimulus.
Holger Sandte, Chief European Analyst from Nordea Bank remarked, “We expect a very gradual increase in core inflation both for Germany and the Euro Area. The key question will be by how much higher energy prices will feed into other prices.”
Meanwhile, other indicators are also stressing broad-based improvements, with manufacturing expanding at the fastest rate since the spring of 2011. The Euro hit the lowest point against the US dollar since 2003 on Tuesday before rebounding modestly in overnight trade.