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Inflation increased - highest possible since 1993

2022-01-06T06:55:52.910Z


Inflation increased - highest possible since 1993 Created: 01/06/2022Updated: 01/06/2022, 7:46 AM Inflation in Germany could reach a new high. © Patrick Pleul / dpa-Zentralbild / dpa After years of moderate inflation rates, people in Germany will have to cope with a sharp rise in consumer prices in 2021. What are the reasons? Wiesbaden - Rapidly increased energy prices, delivery bottlenecks an


Inflation increased - highest possible since 1993

Created: 01/06/2022Updated: 01/06/2022, 7:46 AM

Inflation in Germany could reach a new high.

© Patrick Pleul / dpa-Zentralbild / dpa

After years of moderate inflation rates, people in Germany will have to cope with a sharp rise in consumer prices in 2021.

What are the reasons?

Wiesbaden - Rapidly increased energy prices, delivery bottlenecks and the withdrawal of the temporary VAT cut fueled inflation in Germany last year.

Economists expect a three to the decimal point for the annual inflation rate in 2021. That would be the highest level since the early 1990s.

The Federal Statistical Office had measured a higher rate in 1993 with an average of 4.5 percent at the time.

The Wiesbaden authority announced in an initial estimate on Thursday afternoon how consumer prices developed in December and in 2021 as a whole.

Higher inflation weakens the purchasing power of consumers because they can then buy less for one euro than before.

According to economists, it hits poorer households particularly hard.

Because they have to spend a large part of their income on essential goods, such as housing and food.

Rising inflation rates are also bitter for savers.

The bottom line is that savings with poor interest rates lose value.

Reasons for inflation

Inflation in Europe's largest economy was primarily fueled by the rapid rise in energy prices in the wake of the global economic recovery after the Corona crisis in 2020. In November 2021, household energy rose by 22.1 percent within one year.

At the same time, the withdrawal of the temporary VAT cut had an impact last year: the regular rates have been in effect again since January 2021, so goods and services have tended to be more expensive year-on-year.

In addition, there were material shortages and delivery bottlenecks as well as the introduction of the CO2 levy at the beginning of 2021 of 25 euros per ton of carbon dioxide that is produced when diesel, petrol, heating oil and natural gas are burned.

Since the beginning of this year, 30 euros per ton are due.

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According to economists, it could take a little longer before the comparatively high inflation rates fall again.

They also expect a three to the decimal point for the annual inflation rate in 2022.

The VAT effect does not apply.

Economic research institutes such as the Ifo Institute and the Institute for World Economy point to persistent delivery bottlenecks that increase manufacturing costs.

The rise in energy prices is also likely to give inflation a further boost for the time being.

"Due to the many long-term contracts with gas suppliers, the sharp rise in natural gas prices is unlikely to reach consumers until the beginning of 2022," argues the Leibniz Institute for Economic Research Halle (IWH).

In addition, there is the increased CO2 tax at the turn of the year.

Inflation is an important yardstick for the monetary policy of the European Central Bank (ECB).

The central bank is aiming for an annual inflation rate of 2 percent for the currency area of ​​the 19 countries and is at least temporarily ready to accept a moderate increase or decrease.

According to the monetary authorities, too, consumers in the euro area will have to live with higher inflation rates for a while. Inflation will be high for a while, but will decline in the course of 2022, said ECB board member Isabel Schnabel in a recent interview. "We are less certain about how fast and how strong the decline will be."

Critics accuse the central bank of fueling inflation with its flood of money, which it actually wants to keep in check.

At its most recent meeting in December 2021, the Governing Council sent the first signal that the ultra-loose monetary policy was coming to an end: the ECB will only purchase additional securities as part of its PEPP corona emergency program until the end of March.

However, the central bank is still investing billions in government bonds and corporate papers.

dpa

Source: merkur

All news articles on 2022-01-06

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