Rising inflation rate – everything is getting more expensive and no end in sight

The inflation rate in Germany is rising and rising. It has now already reached its highest level in 40 years. Whether it’s energy for heating or food prices, consumers are having to dig deeper into their pockets from week to week. There seems to be no end in sight to the price increase.


Highest inflation rate in 40 years

The last time there was a similar price increase as today was in the1980s. At that time, however, wages and salaries also rose correspondingly sharply, whereas today adjustments do not come close to following the rate of inflation. The Federal Statistical Office calculated an inflation rate of 7.3 percent for March. However, the inflation rate for normal living expenses, such as heating, driving or food, is already significantly higher. However, this is not shown separately.

Rising inflation rate - everything is getting more expensive and no end in sight. Maintaining price stability is actually the ECB's job
Rising inflation rate – everything is getting more expensive and no end in sight. Maintaining price stability is actually the ECB’s job

Ukraine war and corona pandemic named as inflation drivers

The price increase is repeatedly blamed by politicians on the war in Ukraine. However, many things already became more expensive last fall. The war in Ukraine only triggered an additional push and primarily influenced energy prices. Another cause was ultimately the Corona pandemic. Lockdowns in various countries made goods scarce and thus more expensive. The current lockdown in the Chinese megacity of Shanghai will further exacerbate this. Containers can no longer be shipped there, which will lead to a further shortage of goods. This will also further drive inflation in our country.


Inflation rate – economists see no end to the price spiral

The major economic research institutes are now forecasting an inflation rate of 6.1 percent for this year. This is a new record in the past 40 years. If supplies of Russian energy sources are actually cut off, they believe it is likely that inflation will exceed 7 percent for the year as a whole. In that case, double-digit inflation would even be possible for individual months.

However, economists at the leading economic institutes are critical of the government’s efforts to contain costs through state measures. In their view, aid packages such as the gasoline rebate, the nine-euro ticket or subsidies of any other kind have a counterproductive effect. This would continue to buy products, which would ultimately only increase prices further.


Maintaining Price Stability Is Actually the Task of the European Central Bank

Fighting inflation is the main task of the European Central Bank (ECB). The latter has announced that it will take any measures to maintain price stability. That is why it wants to phase out its multi-billion bond purchases. Ultimately, it was precisely this program that made inflation possible in the first place. By buying almost worthless bonds, the ECB has printed gigantic amounts of money and put it into circulation. Money that has no countervalue is ultimately the real cause of inflation.

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