FRANKFURT – Germany’s central bank expects domestic prices to rise 5% in 2022, significantly raising its December estimate of 3.6%, it said today.
High inflation in the broader eurozone justifies the European Central Bank normalizing its ultra-loose monetary policy, the central bank added.
“Bundesbank experts now estimate that the inflation rate could reach 5% on average over the year,” Bundesbank Director Joachim Nagel said in a statement. “The eurozone is also expected to experience high inflation. We need to keep our eyes on the normalization of our monetary policy.
Germany’s inflation rate hit 5.1% in February after hitting 4.9% the previous month, both above expectations. Energy prices, in particular, contributed to the price spike, a development that may last longer given Russia’s attack on Ukraine last week. Eurozone data showed prices jumped 5.8% from 5.1% the previous month.
The Bundesbank also said it would not transfer any of its profits from interest payments to the country’s finance ministry and said it had boosted its risk provisions by 1.3 billion euros.