The peak of inflation in Germany has not yet passed
2022.11.23 06:55
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The peak of inflation in Germany has not yet passed
Budrigannews.com – The Bundesbank stated on Wednesday that despite the government’s efforts to reduce energy costs, inflation in Germany may well remain in double digits into the coming year.
Berlin is attempting to contain a surge in energy bills that mirrors an explosion in the market price for energy following Russia’s invasion of Ukraine.
Last month, consumer prices in Germany increased by 11.6%, the fastest rate since the early 1950s.
However, the Bundesbank stated that the so-called “brake”‘s” impact on gas prices may not be immediately apparent and would only be temporary.
The German central bank stated in its monthly report, “The inflation rate could stay in the double digits also beyond the turn of the year.”
It added that consumers would be relieved by the first phase of the government’s plan, which will see them pay for gas in December, but that it might not show up in the official inflation calculation.
The second, more significant component of the plan, which provides subsidies for 80% of gas consumption by households and small businesses, may reduce inflation by one percentage point.
But only for the time being.
The Bundesbank stated, “The effect on the inflation rate will reverse as soon as the gas and electricity price brakes expire.”
The most recent wage agreements in the German chemical and metal industries provided some consolation for the Bundesbank, which is a vocal supporter of the European Central Bank’s efforts to reduce inflation through a steady diet of interest rate increases.
In exchange for one-time compensation, workers in those industries agreed to pay increases that are likely to be below inflation.
According to the Bundesbank, “when the temporary components expire, it makes it easier to return to lower wage increases from a macroeconomic perspective.”
“This could help ensure that the current high inflation rates do not further solidify,” and “it could reduce the extent of second-round effects on the inflation rate, especially in the medium term.”
However, it cautioned that union demands were “exceptionally high,” such as the 10.5% raise proposed for public sector employees.
Additionally, the Bundesbank reiterated its long-standing prediction of a recession in the first quarter of 2023 and the fourth quarter of this year.
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