Bundesbank: Core German Inflation Likely to Stay Elevated for the Time Being
19 December 2022
By David Barwick – FRANKFURT (Econostream) – German core inflation will probably stay high for the time being, the German Bundesbank said on Monday in its latest monthly report.
Inflation would be subject to particularly high volatility in the months ahead, the German central bank said, as the gas price brake comes into effect and could depress inflation to below 10%.
‘From January onwards, the inflation rate should then rise noticeably again, although the second stage of the gas price brake and the electricity price brake should already have a dampening effect on the inflation rate’, it continued.
There is considerable uncertainty about short-term price developments, also due to the January 2023 change of the national CPI base year to 2020, it noted.
‘Regardless of this, the underlying price increase in Germany is likely to remain high for the time being’, it said.
As for German economic growth, it was likely to turn negative in the current quarter, ‘albeit probably somewhat less than previously expected’, the Bundesbank said.
There were indications that the recently tense German labour market was now ‘easing in the context of the economic slowdown’, the Bundesbank said. ‘According to the IAB Unemployment Barometer, this process is likely to continue in the coming months. However, a strong short-term increase in unemployment cannot be derived from this given the expected employment development.’