German June Inflation Accelerates on Oil, ECB May Raise Rates

A 17 percent increase in oil prices in the past year is boosting inflation in Germany and other euro nations, prompting the European Central Bank to raise interest rates three times in the past six months. Investors expect the bank to act at least twice more by the end of the year, futures trading shows.

Excluding oil prices “core inflation in Germany will have increased, but it’s overall inflation at the European level that will concern the ECB,” said Silvia Pepino, a senior economist at J.P. Morgan in London. “It shows a pass-through of past increases in raw material prices, which is a real worry.”
Inflation in the dozen euro nations accelerated to 2.5 percent in May from 2.4 percent in April, holding at or above the ECB’s limit for the 16th month. The ECB aims to keep it just below 2 percent. ECB council member Axel Weber said June 19 that inflation is still “above tolerable levels” and that the expansive monetary policy course should be corrected.

Bloomberg