German inflation rate climbs to 28-year high

INA-  SOURCES

Inflation in Germany is predicted to rise to 4.5 percent in October, the highest rate registered in the country since 1993, according to provisional results published by the Federal Statistical Office (Destatis) on Thursday.
Energy prices, including household energy and motor fuels, saw the highest increase at 18.6 percent year-on-year. Meanwhile, food prices increased by 4.4 percent, according to Destatis.
"There are a number of reasons for the high inflation rates since July 2021, which include base effects due to low prices in 2020," Destatis explained. In particular, a sharp decline in mineral oil product prices last year, and the temporary value-added tax (VAT) reduction introduced as part of the COVID-19 stimulus package have fueled inflation.
The introduction of CO2 pricing in the transport and housing sectors at the beginning of the year, with a charge of 25 euros (around 29 U.S. dollars) per ton of carbon dioxide emitted, further fueled inflation in Germany.
"Price inflation in Germany is quite high in a longer-term comparison," said Nils Jannsen, senior researcher at the Kiel Institute for the World Economy (IfW Kiel) on Thursday. This was primarily the result of "manifold economic effects" of the COVID-19 pandemic.
Global supply bottlenecks are also making "production costs more expensive and also reducing the supply of consumer goods," added Jannsen. At the same time, many private households are likely to be willing to spend money.
The German government expects inflation to return to a "significantly lower level as early as the turn of the year 2021/22" because the base effect of the temporary reduction in VAT will no longer apply. (1 euro = 1.17 U.S. dollars) Enditem