Joachim Nagel expects that in the December world, inflation from

Joachim Nagel expects that in the December world, inflation from

In the European financial context, something that has not happened for many years, in a scenario that is as gloomy as possible for the month of December this year. Thus, the German Federal Bank, as well as the European Central Bank, sound the alarm.

The entire continent must prepare for the worst. An alarm signal in this regard comes from the president of the German Federal Bank (Bundesbank) and also a member of the Board of Governors of the European Central Bank (ECB), Joachim Nagel.

In his warning, the German official made a series of statements on the Deutschlandfunk radio station. Specifically, Joachim Nagel expects that in the world in December, inflation in the euro zone will reach a peak of over 10%.

At the same time, Nagel also added that a slowdown in economic growth or a recession cannot be ruled out.

Thus, “However, the bottom line is that stable prices are ultimately much more important for medium- and long-term growth and good economic prospects for the euro area,” he stressed.

Germany expects a price explosion in the EU

In an optimistic scenario, the German official also stated that there is also good news. Specifically, a period of economic difficulties could be overcome. On the other hand, the head of the Bundesbank also expects an increase in prices.

In his view, “I’ve already said that what we’re seeing in the numbers right now is that prices are likely to continue to rise, in December inflation could very well exceed 10%,” Nagel said.

In addition, only in the next year things could recover. The German official states that starting from 2023, the annual inflation rate would likely decrease slightly. On the other hand, even then it will be much too high and will still exceed 6%.

We note that it is not only Germany that has presented a gloomy scenario for the coming months. For its part, the European Commission announced that in August the average inflation rate in the euro zone reached a record level of 9.1% from one year to the next.

We remind you that from the beginning of the year until now, the inflation rate has been constantly increasing and has registered an absolute record since March, a few days after the war started in Ukraine.

The euro zone is on the brink of recession

In this sense, due to the energy crisis and the increase in inflation, the euro area is on the verge of recession. We also recall that at the end of last week, the Board of Governors of the European Central Bank decided to increase three key interest rates by 75 basis points and signaled further future increases.

Thus, the basic interest rate was increased to 1.25%, the rate on deposits is now 0.75%, and on short-term ECB loans – 1.5%.

At the same time, the ECB also changed its forecasts regarding the growth of the EU GDP in 2023. If until now it was about a growth of 2.1%, according to the new estimates it is about 0.9%.

Therefore, the ECB also increased its inflation forecast, which by the end of 2022. may be 8.1%, 2023 – 5.5%, 2024 – 2.3%.