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Euro gains ground, German CPI inches upwards



On Thursday, the euro posted strong gains. EUR/USD trades at 1.0749. This is up 0.57%

German CPI ticks higher

German inflation rose to 8.7% in January from 8.6% in December. CPI rose 1.0% monthly after a December reading of -0.8%. The report shows that German inflation remains high and it’s still too early to talk of a peak. Good news is that the worst double-digit inflation appears to be behind us. This is due in large part to lower energy costs, largely because of the warm winter in Europe.

The ECB raised rates last week by 50 basis point, bringing the cash interest rate to 3.0%. The cash rate remains well below that of all other major central banks – the Fed’s rate, for example, is at 4.75%. The ECB has noted that core inflation is a more reliable indicator than headline inflation and remains much higher than expected. The next meeting of the central banks will be held in March. 16: The markets have predicted a 50-bp rise. The future is unknown. The ECB may take a pause to assess the impact on its tightening cycle, or it could keep hiking, maybe in small increments 25 bp per month, until there are clear signs that core inflation has fallen.

The ECB rate policy is primarily geared towards taming inflation ,…

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