**German Economy: Inflation Remains on Radar as Core Prices Trend Up**
Germany has witnessed a persistent rise in its core prices since the start of the year, according to the latest data released by the Federal Statistical Office (Destatis).
Headline Inflation Confirms Rise
Headline inflation, as measured by the Consumer Price Index (CPI), edged up slightly to 2.4% in April from 2.2% in March. The increase was driven primarily by higher energy and food prices. However, economists note that core inflation, which excludes volatile energy and food components, has been on a persistent trend since January.
Core Inflation Shows Underlying Pressure
Core inflation, a gauge of underlying price pressures, increased to 3.0% in April, down slightly from 3.3% the previous month. Despite this modest decline, it remains significantly higher than the European Central Bank’s target of 2%.
Base Effects Phased Out
Destatis notes that the elevated core inflation trend is partly attributed to base effects. The comparison base has been gradually moving away from the low levels seen during the pandemic, when many businesses were closed or operating at reduced capacity.
Wage Pressures to Weigh on Core Inflation
Economists caution that core inflation is likely to remain elevated in the coming months, driven by rising wage pressures and supply chain disruptions. The German economy has been resilient, with businesses facing difficulties in hiring staff, leading to higher wages. This higher cost of labor is expected to translate into higher prices for consumers.
Outlook and Policy Implications
The persistent rise in core prices is a concern for policymakers at the European Central Bank (ECB), which is tasked with keeping inflation within the 2% target. While headline inflation is expected to gradually moderate in the second half of the year, economists predict that core inflation could remain elevated for an extended period.
Expert Insights
“The trend in core prices is a key indicator to monitor in the coming months,” said Carsten Brzeski, chief economist at ING Germany. “If it continues to rise, it could put pressure on the ECB to tighten monetary policy sooner than anticipated.”
“We need to see a sustained decline in core inflation before we can expect the ECB to ease its current hawkish stance,” added Klaus Baader, an economist at the Berlin-based SOFI. “The wage pressures and supply chain issues are not going away anytime soon, so it would be premature to expect a significant drop in inflation in the near term.”
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Priyanka 
Mehek