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German inflation slowly rises

June 16, 2015

Consumer prices in Germany keep rising but they are still way below annual inflation targets, new data has shown. An uptick in May indicated that the ECB's bond-purchasing program was finally impacting eurozone nations.

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German inflation rose 0.7 percent in May on the year, data from Germany's Federal Statistical Office, Destatis, said Monday. It was the highest increase in seven months and moved Europe's largest economy further away from the -0.3 percent price development recorded in January.

The May hike came on the back of a 0.5 percent rise in consumer prices in April, but it was still way under the European Central Bank's (ECB) annual inflation target of just below 2 percent.

Monetary policy to the rescue?

Nonetheless, the most recent monthly increase suggested that the ECB's large-scale bond purchase initiative was beginning to impact eurozone economies.

In March, the central bank had embarked on a massive, 1 trillion-euro ($1.1 trillion) bond-buying program to ward off looming deflation and end economic stagnation.

Experts said they expected German inflation to hit almost 2 percent towards the end of the year, reasoning that energy prices would most likely increase considerably in the second half of the year. Also, many companies were expected to pass on to consumers the extra costs of a recent introduction of a minimum wage in the country.

hg/cjc (AFP, Reuters)