German Inflation Increases Rapidly
Meanwhile, preliminary German consumer price inflation figures for September show a much larger increase in price inflation than expected. From 1.9% in August to 2.5% in September. The increase in the EU-harmonized measure is even bigger, from 2.0% to 2.7%.
Of course, as I wrote in the recent post "The Inflation Time Bomb", a significant increase was to be expected, yet this was an even bigger increase than I had thought for September alone-remember, some of the effect I talked about won't show up until October and November-. The increase may perhaps be smaller in other parts of the euro area -that remains to be seen- but this clearly raises the risk that November euro area inflation will actually be closer to 3% than 2.5%.
According to all of the official rules the ECB is supposed to follow, they should raise interest rates-and raise them significantly. Yet they don't, because ECB chief Jean-Claude Trichet is a pathetic coward who aren't man enough to stand up to Europe's most prominent economic crank, Nicholas Sarkozy, even though Sarkozy actually lacks the power to harm Trichet.