Germany’s inflation surges in December due to base effects

Prices moving up: Germany witnessed a surge in inflation in December attributed to base effects, momentarily interrupting the declining trend observed in preceding months. According to data from the Federal Statistics Office released on Thursday, the harmonised inflation rate, designed for comparison with other European Union nations, climbed to 3.8 per cent. This figure aligns with the projections of analysts surveyed by Reuters and marks an increase from the 2.3 per cent year-on-year inflation recorded in November.

The timing of Germany's inflation data is noteworthy for economists, given that the nation typically releases its figures a day ahead of the euro zone inflation data announcement. Projections indicate that eurozone inflation is poised to ascend to 3.0 per cent in December, up from 2.4 per cent in the previous month, as indicated by economist forecasts.

In response to potential inflationary pressures, European Central Bank President Christine Lagarde had previously highlighted the risks associated with rising inflation, suggesting a reluctance towards immediate rate cuts. The uptick in Germany's inflation can be attributed to base effects influenced by the energy relief measures introduced in December of the previous year, specifically targeting gas and district heating sectors, as elucidated by the statistics office.

(With Reuters inputs)