Germany’s inflation expectation grows to 7.5 percent


This is the highest value since the survey began in 2019. The previous month, expectations had been placed at 7.0 percent. A year ago, the corresponding value was much lower, at just over three percent.

Average inflation expected over the next five years rose from 5.3 percent to 5.4 percent in June.

84 percent of respondents expect inflation rates to continue to rise in the next twelve months, while only 5.0 percent expect inflation to decline.

A firm anchoring of inflation expectations is considered an important objective of monetary policy, which works primarily by managing expectations.

If expectations are unanchored, there is a threat of raising wage demands, which in turn can cause companies to raise prices. Economists speak of a spiral of rising prices and wages.

Another survey, conducted by German insurer Allianz, reveals that high inflation is the main current concern of Germans. 57 percent of the 1,000 respondents named rising prices as the issue that worries them the most, according to the results of the survey published on Monday (11.07.2022).

Rising energy and raw material prices

Most respondents said they expect the government to take steps to curb inflation. Among them, 27.7 percent considered a tax cut useful in this regard, while 18.2 percent would support a control and cap on electricity prices and 9.0 percent an aid to the most needy households.

The European Central Bank (ECB) has a medium-term target of two percent inflation for the eurozone. However, June inflation in the euro area was 8.6 percent (in Germany 7.6 percent), a record since the introduction of the euro.

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This is mainly due to high price increases in energy and raw materials, as well as many intermediate products.

The ECB announced interest rate hikes to curb inflation. However, many other central banks have already acted and raised their key interest rates several times and significantly. (DPA).

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