The Deutsche Bundesbank expects inflation to fall in the current month due to a statistical effect. In March, the inflation rate in Germany is likely to fall significantly due to a base effect,” wrote the central bank in its monthly report published on Monday. After Russia’s war of aggression in Ukraine about a year ago, energy prices had skyrocketed, driving up inflation. “From March, on the other hand, the increased price level forms the basis for calculating the inflation rate, which is reflected in a lower overall rate,” explained the Bundesbank.
In February, consumer prices in Europe’s largest economy rose by 8.7 percent compared to the same month last year. According to economists, inflation has now become broader and affects many other products besides energy and food. The central bank also expects the core rate excluding energy and food prices to remain high.
At the same time, the Bundesbank continues to anticipate a decline in gross domestic product (GDP) at the beginning of the year. “All in all, German economic activity will probably fall again in the current quarter,” the monthly report said. However, the decline is likely to be less than in the final quarter of 2022, when German economic output shrank by 0.4 percent compared to the previous quarter. If the gross domestic product (GDP) falls two quarters in a row, economists speak of a technical recession. (dpa)