Germany’s inflation shows no signs of slowing

Significance

Soaring inflation coincides with declining consumer and business confidence. Germany’s main economic forecasters expect inflation to continue in double digits over the coming months and remain stubbornly high throughout 2023.

Impacts

• Rising inflation increases the possibility that the ECB will raise rates by 75 basis points at its monetary policy meeting on October 27.
• Unless there is more EU joint borrowing, the economic recovery from the war in Ukraine will be disjointed across the euro-area.
• The cost-of-living crisis will boost the support of the Alternative for Germany in the east of the country.
• Inflation does not appear to be having a significant impact on the German public’s strong support for Ukraine in its war against Russia.