German Inflation Will Turn Positive in January, Bundesbank Says

© Reuters

(Bloomberg) — Price growth in Europe’s largest economy is likely to be “clearly positive” this month for the first time in half a year, according to the Bundesbank.

After the phasing-out of a temporary sales-tax cut and the introduction of an emissions-pricing scheme, the cost of many goods and services in Germany is likely to have risen on an annual basis, the country’s central bank said in a monthly report published Monday.

A return to positive inflation rates would mark a noticeable shift compared to the last five months, when the index was negative. That was largely a result of tax cuts introduced to stimulate consumption during the pandemic crisis, weighing on price growth in the wider euro area.

“However, there is uncertainty as to whether the effects of the changed tax rates can be fully reflected in the price statistics in view of the ongoing business closures,” the report said, citing Germany’s continued lockdown measures.

The prospect of resurgent inflation in Germany could help lift it throughout the whole euro region, providing reassurance to European Central Bank officials who have unleashed repeated salvos of stimulus in their attempts to ignite price growth.

“2021 could be the first year in a long while in which the ECB’s own inflation projections turn out to be too low,” Carsten Brzeski, global head of macro at ING, wrote in a report. “Lower inflation stemming from negative base effects from lower energy prices, the German VAT reduction and social restrictions deflation are all set to turn into drivers, pushing headline inflation towards 2%.”

READ  Trump to Meet China's Liu in a Sign Trade Talks Are Reaching Final Stages

In its report, the Bundesbank also noted that recent signs of resilience in the economy “give reason to hope that the restrictions that were extended and tightened at the beginning of the new year will not set the economic recovery too far back.”

“However, if the infection rate doesn’t subside significantly and the current restrictions on economic activity last longer or are tightened even further, it could lead to a noticeable setback,” it added.

©2021 Bloomberg L.P.


Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Please enter your comment!
Please enter your name here