German inflation rises less sharply than expected in March

The pace of German inflation rose less sharply than expected in March. The headline consumer price inflation rose from 1.4 percent to 1.6 percent. This was greatly due to the noticeably higher price rise for foodstuffs, while energy prices also rose a bit more strongly compared with the earlier year.

Meanwhile, the core inflation rate, which dropped to 1.5 percent from 1.6 percent, had a dampening impact. However, the underlying inflation is expected to pick up in the medium term, noted Commerzbank. The solid German economic activity creates a high level of employment, and workers want to profit from the good economic situation.

This should provide for higher wage pressure, which should eventually translate into higher underlying inflation. But today’s figures imply that inflation pickup would be slow, said Commerzbank.

The harmonized inflation rate for Germany relevant to the ECB rose by three tenths in March to 1.5 percent. But this and the below-expectations rose in Spanish inflation from 1.2 percent to 1.3 percentage point to downside risks to the projection of euro area inflation from 1.1 percent to 1.5 percent and core inflation of 1 percent to 1.2 percent, added Commerzbank.

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