Bundesbank: German Inflation Likely to Remain Fairly Stable in Coming Months

20 November 2023

By Isabel Teles – FRANKFURT (Econostream) – After declining significantly in October, German inflation should hover close to its present level over the near term, the German Bundesbank said on Monday in its latest monthly report.

‘In the coming months, the inflation rate is likely to fluctuate around its current value’, the Bundesbank said, referring to October headline inflation of 3% in Germany.

It was not excluded, however, that inflation would briefly surge again, the report said.

‘From today's perspective, inflation could temporarily rise above 4% again in December, as the price-reducing Natural Gas Heat Emergency Aid from the end of 2022 now has an increasing base effect’, the Bundesbank said.

The feebleness of Germany’s economy since the beginning of the war against Ukraine was expected to continue at least until the beginning of next year, the report said.

‘Economic output is likely to decline slightly again in the fourth quarter of 2023. However, it could then increase slightly again in the first quarter of 2024. The domestic economy should gradually gain momentum’, the German central bank said.

‘[T]here are the first tentative signs of a slow improvement after the turn of the year. The basic trend in incoming orders suggests that foreign demand may have bottomed out’, the report said.

Labour markets in Germany remained tight and there was no expectation that employment would decline significantly in the autumn, the report said.

Globally, the Bundesbank stated that there were no indications of recession, but that rather, a soft landing was the central scenario.

‘[L]abour markets remain robust, inflation rates are falling, and real wages are rising again’, the Bundesbank said. ‘[D]espite the disinflation process driven by tighter monetary policy, the global economy is still expanding cautiously.’