ECB President Jean-Claude Trichet is in hot pursuit of any datapoint that suggests it’s time to hike rates again, and he may have just got it.
German inflation data came in red hot today, rising to 2.6% for the month of April. That’s another month of above 2.0% inflation, the ECB’s target rate for the region.
And while the story thus far has been about food and fuel, it now looks like Germany’s core is starting to heat up.
From Societe Generale:
Energy prices of course rose as expected, but the annual rate was little affected owing to base effects. Rather, the big increases came in core components, especially in leisure and culture as well as hotels and restaurants. This was largely expected, and reflects short-term fluctuations in tourism-related prices which are caused by shifts in the timing of Easter. This year the inflation rate was depressed in March and boosted in April. Where official ex energy and food calculations are available, they suggest core inflation rose as much and slightly more than the headline rate.
Bank analysts estimate that core inflation rose 1.2% in April. While this rise may be seasonal, it still shows that this isn’t just a fuel price issue. That may persuade Trichet that he needs to act again to stay in front of the issue. There was no euro spike today that would indicate markets think a rate hike is certain.
Note Germany’s core inflation spike, starting to edge closer to the Eurozone average:
Photo: Societe Generale