The rise in prices is unlikely to last as short as assumed by the European Central Bank.

In its forecast published on Friday, the Deutsche Bundesbank assumes that the inflation rate will rise to 3.6 percent in 2022.

She screwed up her forecast for this year from 2.6 percent to 3.2 percent.

Most recently, the rate of inflation had climbed to its highest level in almost 30 years compared to the same month last year: in November it was 5.2 percent.

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In the second half of this year, special effects such as the expiry of the temporary reduction in VAT or the introduction of the CO2 price would have led to an increase in inflation. The general price level has risen so strongly because the raw material prices for energy have increased surprisingly strongly on the international markets, according to the Bundesbank. In addition, companies would pass higher costs on to consumers due to the supply bottlenecks for important preliminary products and raw materials and, in addition, expand profit margins when there is strong demand.

This is impressively demonstrated by the development of producer prices. The German manufacturers increased their prices in November more sharply than in 70 years, as the Federal Statistical Office also announced on Friday. Compared to the same month last year, producer prices for industrial products rose by 19.2 percent. According to statisticians, energy and intermediate products such as wood and metals in particular rose in price. The producer prices are considered to be the precursors for the development of inflation. These are the prices that manufacturers charge for their goods even before the products are further processed or come on the market. "So far there are no signs that there will be any lasting relaxation soon," said Commerzbank economist Ralph Solveen. Not only with energy,but also in the case of the other intermediate products, there was no decrease in price increases. "The resulting sharp rise in costs is increasingly being passed on by the producers of consumer goods to their customers," said Solveen.

Although the Bundesbank expects the influence of energy prices and the effects of supply bottlenecks to subside in 2023, it believes the inflation rate will remain comparatively high at 2.2 percent in 2023 and 2024.

The reasons for this are clearly rising wages, the good economic situation, but also the costs caused by the conversion to a climate-neutral economy.

The fact that the price increase will be even higher does not seem to be ruled out: "As in the euro area, the upside risks predominate for the inflation rate," said Bundesbank President Jens Weidmann.

"Monetary policy should not ignore these risks and remain vigilant."

Corona and delivery bottlenecks are slowing the economy

The Bundesbankers revised their growth expectations downwards. Instead of the growth of 3.7 percent forecast in June, the Bundesbank now expects an increase of 2.5 percent. In the next year, too, the gross domestic product will not grow as strongly as expected at 4.2 percent. "The upswing is postponing a bit backwards," said Weidmann. The fourth wave of the corona pandemic and the resulting restrictions and delivery bottlenecks would slow the economy in the winter half-year. However, the economy should pick up speed again from spring.

According to the Bundesbank, the recovery will primarily be driven by consumption, but the delivery bottlenecks should also resolve by the end of the year.

"The strong upturn means that the overall economic capacities will again be utilized to an above-average rate from the second half of next year," explained the Bundesbank President.

For 2023, the Bundesbank economists expect an increase in gross domestic product (GDP) of 3.2 percent.