Berlin, Sept. 30 (BUS) – Germany’s inflation rate rose to more than 4 percent for the first time in nearly 28 years in September, but experts said they did not expect high inflation to be a permanent feature of Europe’s largest economy.
Consumer prices in Germany rose 4.1 percent in September compared to September 2020, according to a preliminary estimate by the Federal Statistical Office.
The last time the figure exceeded the 4 percent threshold was in December 1993, when the rate was 4.3 percent, according to the international German news agency dpa.
Rising energy prices have driven most of the rally, as the global recovery from the coronavirus pandemic has boosted demand for oil and other fuels, but there have also been strong hikes in the price of basic foodstuffs.
In September, consumers had to pay 14.3 percent more for household energy and fuel than a year earlier, according to preliminary data.
The withdrawal of the temporary value-added tax cut, which was put in place to stimulate demand during the pandemic, is also affecting inflation figures.
Previous higher rates have been in place again since January 2021, so goods and services have become more expensive.
Inflation rates of around 5 percent are considered possible this year. However, economists see high inflation as a temporary phenomenon.
Earlier this week, European Central Bank President Christine Lagarde said: “The main challenge is to ensure that we do not overreact to temporary supply shocks that have no effect in the medium term, while reinforcing positive demand forces that could significantly lift inflation. sustainable toward our 2 percent inflation target.”
If salaries remain low, inflation will not get out of control either: Veronica Grimm, a member of Germany’s most important advisory committee on economic policy, said: “As long as wage agreements remain moderate, there is little to suggest that we will face perpetual inflation.”
Investors reacted nervously to the news, with the leading DAX index emerging from its previous highs, amid expectations that the European Central Bank will soon scale back its current generous fiscal policies.
“The ECB is unhappy in view of the price development. That was evident at the last meeting,” said Thomas Getzel, chief economist at VP Bank.
Getzel said that an extension of the emergency asset purchase program set up to counter the effects of the pandemic beyond March next year is highly unlikely.
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