Bundesbank: Core Inflation to Continue Somewhat Above 4%

23 October 2023

By Isabel Teles – FRANKFURT (Econostream) – German core inflation should remain a bit over 4%, despite the weaking of the general inflation rate, the German Bundesbank said on Monday in its latest monthly report.

‘In the coming months, the inflation rate should weaken somewhat further due to the strong increase in energy prices in the second half of 2022 and the gradual further fall in prices for food and non-energy goods', the Bundesbank said.

‘However, the core rate is likely to continue in the near future somewhat above 4%, especially because of the unchanged strong dynamics of services prices’, the German central bank said.

Seasonal increases in demand and supply concerns had contributed to rising energy and gas prices in Europe since August, the Bundesbank noted.

‘Crude oil prices rose due to Saudi Arabia's and Russia’s production cuts and to the supply concerns as a result of the conflict in Israel’, the Bundesbank said.

Unemployment levels were 'very stable and comparatively low' in the context of a weak economy and strong immigration, according to the Bundesbank.

'The German economy got a boost from the still robust labor market and strong wage increases as inflation declined', the Bundesbank said with an eye toward the last quarter. 'However, private households have probably not yet used the additional spending flexibility to increase consumer spending.'