Preliminary data for the January inflation rate (which may be revised) suggest an annual growth rate of prices by 2,4%, which is faster than 2.2% a month earlier. That was slightly above expectations (some polls from news agencies have assumed an increase of 2,3%), but it is not surprising, as December's original score, which is significantly higher than forecasts.Nevertheless, the penultimate release in which inflation exceeded targets of 2%, providing a more hawkish tone of the central bank at a meeting in January. This has resulted in a stronger euro a month in conjunction with some of the factors that led to the abrupt closing of short positions as traders greatly mistaken about the fate of the single currency.
However, the reaction of the ECB a bit more complicated than usual. Not Peripherals pushes inflation. Inflation rate remains high here, especially in light of the significant fiscal measures, but there is still a good chance that inflation will slow down when one-time increase in consumer tax will cease to affect performance.
Meanwhile, inflation is going up in Germany (now 1.9%), that's where lies the main problem. On the one hand, it is not so bad. To regain some competitiveness, peripheral economies have seen their prices rise toward German levels. In Europe, in particular the rigidity of nominal wage levels mean that it is not so easy to achieve lower prices, so that high inflation in Germany - is another problem. The problem is that the response of the ECB (rate increase) may affect this process further weakening of economic activity in the periphery. Europe seems to be facing at the moment with the right type of inflation, but ECB will not allow it to develop.
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