Germany’s inflation is likely to rise sharply from the current level due to the VAT reduction in the previous year, Bundesbank said in its monthly report on Monday.
“From today’s perspective, rates between 4 percent and 5 percent are temporarily possible from September until the end of the year” the bank said.
However, economists expect inflation to fall noticeably at the beginning of next year, but will remain above 2 percent by the middle of the year.
The central bank said the German economy continued the recovery that began in the spring at a faster pace. Overall, economic output is likely to grow more strongly in the third quarter than in the spring, the experts noted.
Nonetheless, the central bank estimated that it will not reach the pre-crisis level of the fourth quarter of 2019 in the summer due to the supply-side difficulties in industry.