The Bundesbank cut its outlook for the German economy and forecast significantly higher inflation as rising food and fuel prices hit household purchasing power and confidence.
The German central bank now expects prices to rise 7.1% in 2022, well above the 3.6% forecast in December while the 2023 figures were revised to 4.5% from 2.2%.
“Inflation will be even stronger this year than it was in the early 1980s,” said BUndesbank President Joachim Nagel, referring to the previous period of painfully high consumer prices.
“Price pressures have intensified again recently, which is not fully reflected in current forecasts. If this trend continues, the average annual inflation for 2022 could be significantly higher than 7%,” he said. Nagel.
The new estimates are broadly in line with revisions to the ECB forecast, which showed accelerated inflation from rising fuel and food prices and a major blow to growth.
In 2024, the last year of the Bundesbank forecast, inflation is expected at 2.6%, well above the ECB’s target for the euro area of 2%.
“Inflation rates in the eurozone will not fall by themselves. Monetary policy is called upon to reduce inflation through decisive action,” he said.
In terms of growth, the German central bank now expects Europe’s largest economy to grow 1.9% this year, less than half the 4.2% forecast in December, while it expects growth in 2023 to be reduced to 2.4% from 3.2%.
Despite the downgrade, growth forecasts for 2022 are somewhat more optimistic than the Commission’s 1.6% growth forecast for Germany.
Source: Capital
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