German inflation reaches half-century peak of 7.9pc

GERMAN inflation has returned to its highest level in almost 50 years after temporary relief offered by tax cuts and cheap train tickets subsided.

Inflation in Europe’s biggest economy hit 7.9pc in August – its highest since the winter of 1973-74, when prices were stoked by an oil crisis.

This figure was first reached in May, before slipping back to 7.5pc by July, according to statistics agency Destatis.

Germany temporarily lowered taxes on fuel at the start of June and introduced cheap train tickets offering a month’s worth of travel for just €9 (£7.70) in a bid to ease price pressures.

But the impact proved short-lived, with both measures due to expire today.

The situation is expected to deteriorate later in the year after the Bundesbank warned inflation could surge as high as 10pc this autumn, though it said the outlook was “extremely uncertain”.

A surge in energy prices driven by Russia’s war in Ukraine remains the biggest driving force behind inflation in Germany.

Household electricity and fuel costs jumped 35.6pc in the year to August, according to the latest figures.

Food prices rose 16.6pc, while ongoing disruption to supply chains from the pandemic also pushed up inflation.

The sky-high figures will pile more pressure on the European Central Bank to do more to keep prices under control.

The central bank, which last month raised interest rates for the first time in more than a decade, is expected to announce another increase at its meeting next week.

Carsten Brzeski, an economist at ING, said: “It is very clear that hardly any current central banker has seen inflation rates as high as they are now in his or her professional life.

“This is why for the ECB, today’s increase in German headline inflation will further heat up the internal debate on what to do next.”

Meanwhile, German ministers are set to discuss soaring energy bills at a two-day retreat that started yesterday.

Berlin is said to be open to discussing a price cap on energy supplies across the EU amid growing fears the crisis could drive the region into recession.

Ursula von der Leyen, president of the European Commission, has said Brussels is drawing up emergency plans to intervene in the bloc’s energy market to break the link between soaring gas and electricity prices.