Inflation has also risen significantly recently in the euro area.
(Photo: dpa)
Frankfurt Prices in Germany continue to rise. In December, the inflation rate in this country was 5.3 percent, as the Federal Statistical Office announced on Thursday based on a preliminary estimate. In November prices had risen by 5.2 percent – as much as they had not been during the boom after reunification in 1992.
According to the results available so far, the annual average inflation rate is expected to be 3.1 percent in 2021. In the pandemic year 2020, prices rose by only 0.5 percent compared to the previous year, in 2019 the annual rate was 1.4 percent.
Inflation has also risen significantly recently in the euro area. It was 4.9 percent in November, the highest level since the beginning of monetary union. The European statistics agency Eurostat will publish the rate for December tomorrow, Friday morning.
Inflation is causing controversial debates among economists and in the financial markets. In December, the Bundesbank raised its forecast for Germany significantly. According to the European method of calculating the harmonized index of consumer prices (HICP), it expects an inflation rate of 3.6 percent for this year, after having previously assumed 1.8 percent.
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The European Central Bank (ECB) also increased its forecast significantly. However, she continues to attribute the increase mainly to special effects from the pandemic, especially to delivery bottlenecks, catch-up effects in consumption and the reversal of the VAT reduction from last year in Germany.
It continues to assume that the price pressure in the euro area will ease in the course of the year. Some economists, however, expect higher price increases in the long term. Within the Governing Council, too, individual members are issuing stronger warnings about the dangers of inflation. If the rate of inflation remains high for longer, the likelihood of the so-called interest rate turnaround increases, as a look at the USA shows.
The minutes of the Fed’s December meeting published on Wednesday evening suggest that US interest rates could be raised even earlier and more sharply than announced in December. The Fed could also begin to shrink its balance sheet total, which has been significantly inflated through bond purchases in recent years.
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