Price inflation in the euro area is easing. Inflation falls to 2.8 percent. ECB target is within reach. But experts warn against giving the all-clear too early.
Inflation in the Eurozone is falling at the beginning of the year. Consumer prices only increased by 2.8 percent in January compared to the same month last year, as the EU statistics office Eurostat announced in an initial estimate. In December, inflation was still 2.9 percent.
So-called “core inflation” also fell in January. This excludes energy and food prices, which are prone to fluctuations, and alcohol and tobacco are also not taken into account.
ECB is on the home stretch
Bundesbank President Joachim Nagel sees the ECB on the home stretch in its fight against inflation. “Price pressure continues to ease, which is likely to be the case in the coming months,” believes Thomas Gitzel from VP Bank. This brings the goal of the European Central Bank (ECB) into sight. The monetary authorities consider an inflation rate of 2.0 percent to be appropriate.
The Inflation problem is not yet resolved
For Alexander Krüger, chief economist at Hauck Aufhäuser Lamp Privatbank AG, these are “encouraging signals”. For KfW’s chief economist, Fritzi Köhler-Geib, “the prerequisites for a further weakening of the rise in consumer prices are in place.” In particular, the difficult economic situation is likely to keep price increases in check.
But it would be premature to declare victory over inflation, believes Commerzbank’s Christoph Weil. ECB boss Christine Lagarde and other central bankers argue similarly. The ECB did not change the key interest rate at its first interest rate meeting this year. It is argued that the geopolitical environment is too fragile. Caution is also advised with regard to wage developments.
Wage increases can fuel inflation again
Collective bargaining is currently taking place in many sectors in Germany. The tone is rough. Union representatives are pushing for wage increases to compensate for price increases in many areas. Working conditions should also improve for employees. For companies, the bottom line is that this means higher expenses. These costs are typically passed on to customers, driving up inflation.