Inflation appears to have peaked and will likely moderate in March. However, economists do not expect prices to drop anytime soon.
According to economists, inflation in Germany slowed in March although it was still at a high level. On average, economists expect consumer prices to increase by 7.3 percent compared to the same month last year.
In January and February, the annual inflation rate was still 8.7 percent. The Federal Statistical Office will release its first forecast of inflation development for March on Thursday afternoon.
War in Ukraine fuels inflation
“The inflation rate in Germany in March is likely to fall significantly due to the base effect,” the Bundesbank recently said in its monthly report.
After Russia’s war of aggression in Ukraine nearly a year ago, energy prices skyrocketed from year to year, driving overall inflation. Now prices will be compared to the spring 2022 high. This is called the base effect.
It was below eight percent last August.
Government price brakes for gas and electricity, effective from March 1 retrospectively to January 1, 2023, will also have a mitigating effect. Inflation was 7.0 percent last August, below eight percent, according to revised data from statisticians.
For a long time, inflation was mainly caused by high energy and food prices. Meanwhile, price increases are affecting more and more parts of everyday life. Higher inflation rates reduce the purchasing power of consumers because then they can afford less for one euro.
Economists don’t expect easing
According to economists, inflation peaked in Europe’s largest economy. However, they do not expect a full relaxation in prices in the current year.
Bundesbank boss Joachim Nagel, a member of the European Central Bank (ECB) Monetary Policy Council, said, “Our fight against inflation is not over yet.” In March, monetary authorities in the euro area increased interest rates in the euro area for the sixth consecutive time due to persistently high inflation.
Source: ZDF
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