German inflation defeated firms case for a larger ECB rate hike

German inflation rose to its highest level in nearly half a century in May on the back of soaring energy and food prices, strengthening the case for a big, half a percentage point European Central Bank interest rate hike in July.

Prices have risen sharply across Europe over the past year, first on supply chain problems after the pandemic, then to Russia’s war in Ukraine, suggesting that a new era of rapid price growth has swept away a decade of ultra-low inflation.
German consumer prices rose to 8.7% from 7.8% in May, well ahead of expectations for 8%, official figures show.
Inflation was last time this high in the winter of 1973/1974, when the first oil crisis led to a new and difficult-to-tame inflationary cycle.
ECB made clear last week that interest rates must go up to stop high inflation from getting entrenched.

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