Bundesbank President Nagel expects double-digit inflation in autumn

“The tank discount and the nine-euro ticket are running out, which should increase the inflation rate by a good one percentage point,” Nagel told the Rheinische Post (Saturday edition). The gas surcharge is coming, in return the VAT on gas should be reduced, which in turn will dampen prices. “All in all, an inflation rate of ten percent is even possible in the autumn months.”

He also made the historical dimension clear: “Double-digit inflation rates were last measured in Germany more than seventy years ago.” In the fourth quarter of 1951, according to the calculations made at the time, the inflation rate was eleven percent.

Nagel is not giving the all-clear for the coming year either. “The issue of inflation will not go away in 2023.” Russia has drastically reduced its gas supplies, and natural gas and electricity prices have risen more than expected. After the inflation rate for 2022 as a whole should be eight percent according to European calculations, Nagel expects a rate of six percent for the coming year.

Nagel therefore called for further interest rate hikes by the European Central Bank (ECB): “With the high inflation rates, further interest rate hikes must follow.” That is also generally expected. The next meeting will take place on September 8th. A number for a possible rate hike Nagel didn’t want to name. “It will be crucial to keep medium-term inflation expectations stable at two percent. I am convinced that the Governing Council of the ECB will take the necessary monetary policy measures,” said the Bundesbank President. In July, the ECB raised interest rates by 0.50 percentage points.

Nagel is also pessimistic about economic development: “If the energy crisis worsens, a recession appears likely next winter.” In the first half of the year, the German economy was still doing quite well. “But if there are further delivery problems, for example due to prolonged low water, the economic prospects for the second half of the year would deteriorate further,” said Nagel. He called on the collective bargaining partners to make responsible collective bargaining agreements.

/jsl/he

FRANKFURT (dpa-AFX)

Image sources: Andrey Esin / Shutterstock.com, Claudio Divizia / Shutterstock.com

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