FRANKFURT, Nov 23 (Reuters) – Inflation in Germany could properly stay in double digits into subsequent yr regardless of the federal government’s efforts to curb power costs, the Bundesbank mentioned on Wednesday.
With client costs in Germany rising by 11.6% final month, their quickest tempo because the early Nineteen Fifties, Berlin is attempting to cap a surge in power payments that mirrors an explosion available in the market value for pure gasoline following Russia’s invasion of Ukraine.
However the Bundesbank mentioned the impact of this so known as “brake” on gasoline costs could not grow to be instantly seen, and would solely be short-term anyway.
“The inflation fee may keep in double digits additionally past the flip of the yr,” the German central financial institution mentioned in its month-to-month report.
It added the primary leg of the federal government’s plan, which can see it foot gasoline payments in December, would deliver reduction to customers however could not register within the official inflation calculation.
The second, extra important a part of the plan, wherein 80% of households’ and small corporations’ gasoline consumption might be subsidised, could knock 1 share level off inflation.
However solely whereas it lasts.
“As quickly because the gasoline and electrical energy value brakes expire, the impact on the inflation fee will reverse,” the Bundesbank mentioned.
The Bundesbank, which is a vocal supporter of the European Central Financial institution’s efforts to curb inflation through a gradual food regimen of rate of interest hikes, took some consolation from the most recent wage offers within the German chemical and steel sectors.
Staff in these industries agreed to what is going to possible show to be below-inflation pay will increase in return for one-off compensation funds.
“From a macroeconomic perspective, it makes it simpler to return to decrease wage will increase when the short-term parts expire,” the Bundesbank mentioned.
“This might cut back the extent of second-round results on the inflation fee, particularly within the medium-term, and assist be sure that the present excessive inflation charges don’t additional solidify.”
It warned, nonetheless, that union calls for, akin to the ten.5% enhance put ahead for public-sector staff, had been “exceptionally excessive”.
The Bundesbank additionally reiterated its long-standing name for a recession within the final quarter of this yr and the primary quarter of 2023.
Reporting By Francesco Canepa; Enhancing by Alex Richardson
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