The German Central Bank announced that it does not expect another significant decline in the inflation rate in Germany, and the bank wrote in its monthly report published on Monday: “The inflation rate is expected to fluctuate in the coming months around its current value.”
The Harmonized Consumer Price Index, which the European Central Bank uses to determine its monetary policy, fell in Germany last October to 3% after reaching 4.3% in September and to 6.4% last August.
However, the bank’s experts estimated that increases in the prices of food and other goods will continue to decline, “and it is likely that the relatively high increase in service prices will continue for a while, in light of the strong rise in wages.”
The bank expected a resumption of the rise in energy prices, due to reasons including the rise in the price of carbon dioxide on fossil fuels, by the end of the year. The bank did not rule out a temporary rise in the inflation rate next December to more than 4%.
It is noteworthy that immediate assistance to gas and heating customers from a distance in December 2022 had an impact in alleviating prices, but this factor no longer exists in the current year.
The bank expected that the domestic economic output would again record a slight decline in the fourth quarter of this year. Preliminary data from the Federal Statistical Office reported that the German economy contracted in the third quarter by 0.1% compared to the previous quarter.
When an economy contracts in two consecutive quarters, it is known as a “technical recession.”
Experts’ expectations and the German government’s expectations indicate that the largest economy in Europe will record a slight contraction throughout the year 2023. The bank said that it is possible that the gross domestic product will achieve some growth again at the beginning of the new year.
The bank also expected that the internal economic situation would gain momentum “because it is expected that the net real incomes of families will continue to rise due to higher wage increases and lower price pressure.”
