Annual inflation is higher than it has ever been since the founding of the Federal Republic

To find a similarly high value in the statistics of the Wiesbaden authorities, one has to go back a long way: in 1951 the then Federal Republic of Germany recorded an inflation rate of 7.6 percent. However, the calculation method has changed over time.

Even in reunified Germany, inflation has never been as high as in 2022. In 2021, consumer prices in Germany increased by an average of 3.1 percent.

Higher inflation rates reduce the purchasing power of consumers who can afford one euro for less. People’s financial mobility is shrinking, and their income increases are consumed by inflation.

At the end of 2022, inflation in Germany slowed from a high level. One-off emergency assistance for gas and central heating customers also made itself felt, according to state statistics offices. The federal government will pay for the down payment in December.

Consumer prices in December were 8.6 percent higher than in the same month last year, according to the Federal Office’s forecast. While the annual inflation rate was still 10 percent in November, it reached a record level of 10.4 percent in October. From November to December 2022, consumer prices fell 0.8 percent.

Energy and food have been price drivers for months, with prices skyrocketing. Russia’s attack on Ukraine and supply bottlenecks exacerbated the already tense situation.

This triggers general inflation. Consumers in Germany had to pay 24.4% more for energy in December than a year ago. Food prices increased by 20.7 percent in one year.

The German state is trying to relieve companies and consumers with billions of dollars in aid. In the current year, price brakes for electricity and gas are intended to mitigate the consequences of rising costs for households and companies.

Economists assume that state aid will reduce the rise in inflation in 2023. But there are no signs of a rapid easing in prices: “Inflation is high and will only come down gradually,” Bundesbank Chairman Joachim Nagel said recently.

The European Central Bank (ECB) has been trying to curb inflation in the eurozone by raising interest rates since the summer of 2022. Because if loans get expensive, this slows demand and can offset high inflation rates. But at the same time, high interest rates place a burden on the economy, which has already been weakened by the consequences of the war.

After ECB President Christine Lagarde’s rate hike last year, followed by four consecutive rate hikes last year and a key 2.5 percent rate, it seems that the ECB has yet to see itself at the end of its battle with record high inflation. 2022 bank meeting in mid-December: “We have to go a long way.”

(SDA)