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Consumer Prices: Inflation picks up slightly in July


TIME ONLINE | News, backgrounds and debates

Wiesbaden (dpa) - Increased energy and food prices have driven inflation in Germany in July. Consumer prices were 1.7 percent above the same month last year. The Federal Statistical Office thus confirmed provisional data.

In the previous months, the annual inflation rate had been 1.6 and 1.4 percent. Compared with the previous month, consumer prices rose by 0.5 percent in July.

More people in Germany had to pay for energy, which rose by 2.4 percent within one year. District heating, natural gas and electricity cost significantly more. On the other hand, fuel was barely more expensive and light fuel oil even slightly cheaper compared to the same month last year. Excluding energy prices, the inflation rate would have been only 1.5 percent.

Consumers also had to dig deeper into their wallet (plus 2.1 percent). Significantly more expensive than a year before was vegetables (plus 11.0 percent). There were further above-average price increases for meat and meat products as well as for fish, fish and seafood (both: plus 3.6 percent).

The inflation rate is an important indicator of the monetary policy of the European Central Bank (ECB). The central bank is aiming for a medium-term annual inflation rate of just under 2.0 percent for the eurozone - far enough away from the zero mark. Persistently low or broadly falling prices can lead companies and consumers to postpone investment. That slows down the economy.

The harmonized consumer price index for Germany, calculated for European comparison purposes, was only 1.1 percent higher in July than in the same month of the previous year.

In the euro area as a whole, inflation had weakened noticeably in July. According to the statistics office Eurostat, consumer prices were 1.1 percent higher than a year earlier. This is the weakest increase since February 2018, that is almost one and a half years.

In the face of gloomy economic prospects and weak inflation, Europe's monetary authorities recently hinted at further easing of monetary policy. Initial decisions are expected to be made by the ECB at the September Council meeting, when current economic and inflation forecasts for the euro area are available.

In order to stimulate lending and thus inflation in the euro area, the ECB could tighten the penalty rate for banks. Currently, credit institutions have to pay 0.4 percent interest when they park money at the central bank. Another option could be the ECB buying fresh bonds.

Source: zeit

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