Germany's real rate curve shows why the ECB may no

Ai Huicha, August 29: The European Central Bank may have reached a point of hesitation in fighting inflation, but real interest rates suggest that it is not yet able to completely stop tightening policy. Inflation-adjusted rates set by the market provide the most direct read on the extent to which the ECB's policy rate is suppressing the economy. Germany, for example, has only marginally positive inflation-adjusted interest rates, in stark contrast to the US, which has significantly positive rates. Euro zone inflation data for August will be released on Thursday, with economists forecasting a fall in core inflation to 5.3 percent from 5.5 percent, although even the expected result will not be enough to comfort the ECB. Both real interest rates and Bund yields could edge higher if Thursday's data show that inflation is set to persist.