Inflation in Germany reached a high for the second consecutive month in April as consumers paid more for food and energy, the Federal Statistics Office said Wednesday, as the head of the Bundesbank said the economy should prepare for rising interest rates.
Consumer prices in Germany, Europe’s largest economy, rose at an annual rate of 7.8 percent in April, the statistics office said, citing preliminary figures that are adjusted to make them comparable with inflation data from other EU countries. The office said the inflation rate was the highest since German reunification in 1990.
April was the second straight month that the rate remained above 7 percent, after March saw consumer prices jump 7.6 percent as compared with 2021, largely driven by energy. In April, the statistics office pointed to a sharp increase in the price of food as the main driver for increased prices.
“What stands out in April 2022 is the above-average increases in food prices,” the office said in a statement. “This is where the impact of the war in Ukraine is becoming more and more visible.”
The price of a liter of milk has increased by more than 11 percent since the start of the year, while a kilogram of flour has jumped about 40 percent since the start of the year, according to a survey commissioned for Germany’s financial daily newspaper, Handelsblatt . Many Germans have been panic-buying and hoarding staples, especially flour and oil, out of fears of shortages caused by the war in Ukraine.
The president of Germany’s central bank, the Bundesbank, Joachim Nagel, warned in a speech that the country could be facing a prolonged period of higher prices. “Governments and financial markets alike have to prepare for rising interest rates,” Mr. Nagel said during a conference hosted by DZ Bank on Wednesday,
He has urged the European Central Bank to take more aggressive action to counter the price spiral, pointing to the fact that even before Russia invaded Ukraine on Feb. 24 consumer prices were high in part because of restrictions imposed on imports around the world to stem the spread of the coronavirus.
Across Europe, inflation has hit a record high for six months in a row, and the European Union’s statistics office, Eurostat, has 7.5 percent for April. Uncertainty surrounding Russian energy supplies to Europe has economists warning that an embargo on fossil gas could send the European Union into a recession.
The government is attempting to counteract the spiraling price of energy by cutting taxes on gasoline and offering a monthly public transit pass for less than $10 from June through August. But economists at Berenberg Bank predicted inflation would remain high throughout the summer, affecting businesses first and then consumers.
“Supply-chain shortages and higher energy costs for producers will hit consumers only with a lag,” Holger Schmieding, Berenberg’s chief economist, said. He, too, called on the European Central Bank to take action.
Christine Lagarde, the central bank’s president, signaled in a speech on Wednesday that the bank would be ready to raise its interest rates before the summer is over.
After a decade of sustained disinflation, the recovery from the coronavirus pandemic, followed by Russia’s invasion of Ukraine, “has exacerbated all the main drivers of inflation, while also — as a classic supply shock — increasing economic uncertainty and clouding the growth outlook,” Ms. Lagarde said.
“This has even further complicated the situation facing monetary policy since, in the near term, inflation and growth are moving in opposite directions,” she said. The bank plans to respond by ending its pandemic-era stimulus by the end of July, and could then could raise interest rates “some time after the end” of the stimulus, she said.