Inflation in Germany reached its highest in over 50 years, according to data released on Monday, May 30. Rising energy and food costs pushed consumer prices up 8.7% from a year ago in May. Analysts surveyed by Bloomberg had predicted an 8.1% increase.
The report came just 10 days ahead of a scheduled European Central Bank (ECB) meeting, where officials will discuss large-scale asset purchases and decide on plans to raise interest rates for the first time in more than a decade.
With the German economy, Europe’s largest, suffering from inflation, the ECB’s meeting will also need to lay out a strategy to deal with the effects of the pandemic across the continent.
Inflation numbers in Spain and Belgium also soared past analysts’ predictions.
Spain reported Monday that its inflation rate accelerated to a record high of 8.5% after its government took steps to provide its citizens with concessions like fuel subsidies and an increased minimum wage.
Belgium passed similar measures, as the inflation rate in the country rose to 8.97% in May, its highest in 40 years, due to increased energy and food costs.
The German parliament passed a group of relief efforts that included a one-time subsidy, a child supplement, and a decrease in the price of electricity.
Earlier Monday, German Finance Minister Christian Lindner said the fight against surging prices was the “top priority” while calling for an end to expansive fiscal policy.
“Inflation is an enormous economic risk,” Lindner said. “We must fight it so that no economic crisis results and a spiral takes hold in which inflation feeds off itself.”
ECB President Christine Lagarde has expressed similar concerns. She warned that high prices can potentially become entrenched and reduce consumption when industries suffer from lingering supply shortages and uncertainty about energy reserves, two challenges exacerbated by Russia’s invasion of Ukraine.
With inflation reaching new heights, the effects on households will only continue to worsen, according to ZEW Economist Friedrich Heinemann.
“Consumers will have to reckon with further increases in prices because many inputs are still scarce and wholesale prices are still increasing dramatically,” Heinemann said. “Surprisingly good labor-market data also indicate that the dreaded wage-price spiral could soon pick up speed.”