Sentiment in the euro area is brightening. Consumers and firms are becoming more upbeat about the future. At the same time, consumer prices are increasing at a faster pace. In August, inflation in the euro area stood at 3%. In Germany, the inflation rate, as measured by the Harmonised Index of Consumer Prices, hit 3.4% in August – a level not seen in 13 years. And it is likely to continue rising until the end of the year. These developments understandably have people worried. Higher inflation reduces purchasing power and lowers inflation-adjusted wages and interest income. Very low nominal interest rates compound ... (full story)