Inflation in Germany weakened in June

Inflation in Germany weakened somewhat in June. Consumer prices were still 2.3 percent above the level of the same month last year, as the Federal Statistical Office has calculated. However, for the first time in five months, inflation fell slightly with an upward trend. From May to June consumer prices rose by 0.4 percent. The authority thus confirmed its preliminary information from the end of June. In May, the inflation rate in Europe's largest economy was 2.5 percent, the highest level in almost ten years. Economists do not see a trend reversal towards falling inflation rates in the June figures. On the contrary: many experts believe temporarily inflation rates of around four percent are possible this year. Two special factors in particular are fueling inflation. Energy prices have been rising above average for months. One reason is a so-called base effect: a year ago, when the Corona crisis broke out, crude oil prices collapsed due to low demand on the world market. They have since recovered. In addition, since January 25 euros per tonne of carbon dioxide (CO2) has been due in Germany, which is produced when diesel, gasoline, heating oil and natural gas are burned. A second price driver: the VAT, which was lowered for half a year in 2020, has been back to the old level since January. The Bundesbank expects an inflation rate of 2.6 percent for the current year, although it believes that inflation rates of around four percent are temporarily possible at the end of the year. Next year, the increase in the cost of living should then be only 1.8 percent.