German inflation hits 4.1 percent in September, and now economists question whether central bankers are right to assume the surge in prices is only temporary.
The last time Germany’s inflation was this high, Helmut Kohl was still chancellor, the Deutschemark was still in use, and the country had only recently reunified, sending prices in the east skyrocketing.
“The worst is yet to come,” said Jörg Krämer, chief economist at Commerzbank. German inflation rose to 4% in September, up from 3.4% in August, mirroring a similar jump in Spanish inflation to a 13-year high of 4% in September. Inflation data from France was also released on Thursday, and while it was lower than predicted, it nevertheless touched a decade high of 2.7 percent.
With European energy prices surging and supply chain bottlenecks driving up shipping costs and leaving industries short of everything from steel to semiconductors, economists anticipate total eurozone inflation to reach 3.3%, the highest level since 2008.
German inflation was led by a 14.3% increase in yearly energy prices, while goods prices increased by 6.1 percent, food prices increased by 4.9 percent, and services prices increased by 2.5 percent.
What Central Bank of Germany Has Said
The German central bank has predicted that inflation will rise to 5% this year before falling next year as one-time variables such as the reversal of last year’s value-added tax decrease are removed from the data. However, the Bundesbank has warned of “inflationary risks on the upside.”
ING’s head of macro research, Carsten Brzeski, said he “wouldn’t be surprised” if the European Central Bank reduce asset purchases “to a greater amount” than projected in 2022. Inflation in Germany, he projected, will remain over the ECB’s 2% objective next year.
Inflation in the eurozone is expected to fall from 2.2 percent this year to 1.7 percent next year, according to the European Central Bank (ECB).
