Germany’s energy crunch, caused by reduced gas supplies from Russia, could push inflation up to 10%, the Bundesbank chief warns
Germany is about to see its highest inflation in decades, the president of the nation’s central bank, Joachim Nagel, told the Rheinische Post on Saturday, adding that Germany might fall into a recession.
“An inflation rate of even 10% is possible in the autumn months,” Nagel told the paper, adding that the latest surge in energy prices caused by reduced supplies from Russia – Germany’s major supplier – is likely to drive consumer prices further up.
“Double-digit inflation rates were last measured in Germany more than 70 years ago,”The Bundesbank President added. According to German media, the nation experienced an identical level of inflation in 1951, when it was 11%.
Nagel said that the situation in the nation’s economy will likely remain tension next year, and added that “the issue of inflation will not go away in 2023”Seit dem des all All Des Get get every them alles him Deal Weihnachts dar deal darin “supply bottlenecks and geopolitical tensions are likely to continue.”
Inflation is likely to exceed the Bundesbank’s June forecast by 4.5 points and amount to an average of 6% “before the decimal point next year,”He concluded.
Nagel observed that natural gas and electricity prices are already higher than they were expected. He warned that Germany could be severely affected by reduced gas imports from Russia during a severe heatwave. This led to lower water levels and hindered river transport.
“As the energy crisis deepens, a recession appears likely next winter,”The Bundesbank Chief predicted.
The Financial Times reported that prices paid by German industrial producers increased by 37.2% in the period July 2021 to July 2022. According to the German Federal Statistical Office, it was the greatest increase since the beginning of the 20th century.
Nagel’s forecast comes as Germany faces a major energy crunch. Due to Ukraine’s sanctions, Russia is seeing a steady decline in gas supplies. Russia’s state energy giant, Gazprom, said on Friday it would halt gas transit via the Nord Stream 1 pipeline for three-day maintenance works between August 31 and September 2.
Nord Stream 1 gas supplies to Europe had dropped to 20% from their maximum last month. Gazprom states that 5 turbines are required to operate at maximum capacity to pump gas. The majority of them need repair. After being repaired in Canada, one of the turbines has become stranded in Germany.
Friday’s announcement led to another gas hike in Europe, with prices jumping by 7% to above $2,600 per thousand cubic meters.