Bundesbank Lifts Inflation Outlook as Weidmann Urges Vigilance
Bundesbank Lifts Inflation Outlook as Weidmann Urges Vigilance
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The Bundesbank predicts German inflation will remain above 2% through 2024 -- an outlook that will amplify calls within Europe’s largest economy for a speedy removal of monetary stimulus.
Outgoing President Jens Weidmann is warning that price pressures could be even stronger and warned that the European Central Bank mustn’t ignore those risks.
The central bank sees consumer prices rising an average 3.6% in 2022 before slowing to 2.2% in the subsequent two years, according to projections published Friday. The forecasts are higher than in the 19-nation euro area.
The Bundesbank argues that inflation in Germany reflects strongly rising wages, a “favorable economic situation” and costs related to the transition to a climate-neutral economy -- as well as a range of temporary factors. It also said that higher prices due to delivery and transport bottlenecks have been passed through to consumers.
“The risks for the inflation rate are skewed to the upside, both in Germany and in the euro area as a whole,” Weidmann said. “Monetary policy makers should not ignore these risks. We need to be vigilant.”
| 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|
| Inflation | 3.2% (prev. 2.6%) | 3.6% (prev. 1.8%) | 2.2% (prev. 1.7%) | 2.2 |
| Growth | 2.5% (prev. 3.7%) | 4.2% (prev. 5.2%) | 3.2% (prev. 1.7%) | 0.9 |
Consumers, businesses and politicians in Germany are increasingly on edge after inflation hit 6% last month. With no replacement named yet for Weidmann, who departs at the end of the year, the team around newly appointed Finance Minister Christian Lindner has tried to assuage concerns, arguing that price stability ranks at the top of their agenda.
Citing a stronger outlook for economic growth and inflation, European Central Bank officials on Thursday announced a gradual reduction in bond purchases next year. An emergency pandemic program will be halted as planned in March, with regular asset purchases temporarily boosted to smooth the transition.
Resurgent coronavirus infections in Germany and ensuing restrictions to curb the disease will lead to an economic setback in the current quarter and the first three months of 2022, the Bundesbank said. The economy is seen regaining “significant momentum” in the spring amid “substantially” rising private spending. Supply bottlenecks are seen resolving by the end of 2022.
The Ifo institute will publish its business-climate index at 10 a.m. Frankfurt time.
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