The Germany economy is set for a rapid and broad-based recovery after an unprecedented peacetime contraction in the spring, but a coronavirus vaccine may be necessary before a complete rebound is possible, the Deutsche Bundesbank said on Monday.

Europe’s biggest economy contracted by 10.1 per cent in the second quarter compared to the previous quarter, the German Federal Statistical Office recently said. But it has been making a comeback since much of the epidemic was contained and many restrictions on businesses and daily life were lifted, according to the Bundesbank.

“The clear and broad-based recovery in macroeconomic performance, which began after the low point in April, will continue,” the central bank said in a monthly report.

Meanwhile, in the US, minutes of the July 28-29 Federal Open Market Committee meeting show that members expressed concern over the future of the economy, saying that the coronavirus would likely continue to stunt growth and potentially pose dangers to the financial system.

At the meeting, the Federal Reserve’s policymaking arm voted to keep short-term interest rates anchored near zero, citing an economy that was falling short of its pre-pandemic levels.

While the committee was surprised at the strong rebound in household spending, it cautioned that uncertainty over the economic outlook is “highly elevated”. Risks to the outlook include new waves of the coronavirus and the possibility that government fiscal support was not enough.

Finally, in the UK, inflation accelerated to the fastest rate in four months in July, an unexpected jump that is unlikely to last or persuade the Bank of England to let go of the stimulus pedal.

Data published by the Office for National Statistics shows that British consumer prices climbed by one per cent in July from a year earlier. That is almost double economists’ expectations of a rise of 0.6 per cent. Clothing, rising prices at the petrol pump, and furniture and household goods made large upward contributions to inflation, while falling food prices partially offset the annual increase.

Economists are of the view that the rise in inflation will be short-lived, with some predicting inflation will turn negative next month due to lower energy prices as well as government measures to support businesses.

This report was compiled by Bank of Valletta for general information purposes only.