Prices in Germany are surging at their fastest pace since reunification, threatening to reignite tensions at the European Central Bank (ECB).
German inflation jumped to 5.2pc in November, up from 4.5pc the previous month, as energy bills rocket and firms pass on higher costs from supply chain chaos.
Meanwhile, the omicron variant has cast doubt over the ECB’s plans to rein in its stimulus programme, despite rising prices.
The “shocking” annual rise in Germany marks the strongest inflationary pressure since 1992 when the economy was adjusting to reunification. Inflation in Spain has also picked up to its highest rate in three decades with prices climbing 5.6pc year-on-year.
The latest squeeze on households risks widening the split at the ECB over whether to wind back Covid stimulus to rein in inflation as Germany’s more hawkish policymakers call for action.
The ECB was expected to step up the tapering of its €1.85 trillion bond-buying scheme. However, analysts warn the emergence of a new Covid variant could tempt the rate-setters to delay their plans. Germany is already beefing up Covid restrictions after being hit by a huge Delta wave.
ING economist Carsten Brzeski said the November jump is “another shocker” and warned next month’s figure could be a record high.
“It could take until the end of 2022 before headline inflation will drop below 2pc, if not until 2023.”
However, Marco Wagner, economist at Commerzbank, warned inflation will not fall back to its low pre-pandemic levels as the price surge will cause wages to “rise more strongly”.
He added: “In the medium term, there is much to be said for rising inflation anyway. Stimulative monetary and fiscal policies will push economies to capacity limits and create wage pressures that will translate into higher inflation rates.”
