The inflation rate fell noticeably this month, but the price level remains high.
(Photo: dpa)
German inflation fell significantly in March – to 7.4 percent. That is the good news. But comparing today’s consumer prices to last year’s is only half the story. The dynamic becomes clearer with the monthly price increase of 0.8 percent – extrapolated to the year, this still corresponds to more than ten percent.
The so-called core inflation, which excludes the sharply fluctuating prices for energy and food, has also tended to increase somewhat in a year-to-year comparison as a benchmark. The stock market therefore rightly perceived the bad rather than the good side of the truth in an initial reaction.
The inflation for the euro area, which will be published on Friday and is decisive for the monetary policy of the European Central Bank (ECB), should be about the same: The reported trend looks good, but a closer look at the data shows that always there is still a lot of pressure in the boiler.
After the banking crisis calmed down, at least for the time being, the markets’ perspective changed again. Fears of a recession are waning, and concerns about inflation are growing again. As a result, the risk of interest rates rising for a longer period of time is moving to the fore again.
Because once the banking crisis is over, it will no longer be able to make a major contribution to curbing inflation, as it seemed a week ago. This means that the central banks may have to sharpen their course again slightly.
This change of perspective can happen again and again. For example, if the fear of a credit crunch suddenly rises again, the pendulum swings in the other direction again. The hope remains, however, that it will gradually settle down.
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