German Central Bank expects double-digit inflation, sees signs of recession

FRANKFURT – With energy prices through the roof, inflation in Germany could exceed 10 per cent this year with the economy heading into recession, reported Xinhua, quoting a central bank (Bundesbank) report on Monday.

“There are increasing signs of a recession of the German economy in the sense of a clear, broad-based and prolonged decline in economic output,” the bank’s monthly report said.

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The institution’s economic researchers expect the German economy to shrink markedly in the fourth quarter of this year and the first quarter of 2023.

High inflation has been the main driver of the economic downturn. The surging energy prices are weighing on the country’s energy-intensive industries, eroding private consumption and affecting service providers, the report said.

In August, Germany’s inflation rate rebounded to 7.9 per cent after falling for two consecutive months as a result of the inflation relief measures imposed by the federal government.

Since the relief measures expired at the end of August, inflation is expected to rise in September, the central bank said, adding that the rate is likely to remain double-digit in the next few months.

Germany’s gross domestic product (GDP) grew by 1.5 per cent year-on-year in the second quarter of 2022.

To reduce inflation in the eurozone, the European Central Bank (ECB) has already increased its key interest rates twice this year, with further hikes likely.