Inflation in Germany rose by 4,1 percent year-on-year in September 2021, the first time it has exceeded the 4-percent mark in almost 28 years. 

Inflation in Germany rises to 28-year high

Inflation in Germany exceeded 4 percent for the first time since 1993 in September, according to new figures from the Federal Statistical Office (Destatis). When inflation rises, the purchasing power of consumers is weakened, and the value of savings is diminished - essentially because a euro buys you less than it did before. 

Inflation has been fuelled for months by the rising cost of energy, with increased demand for crude oil in the wake of the coronavirus pandemic driving up prices. Supply bottlenecks and the withdrawal of the temporary reduction in VAT have also had an impact, with goods and services steadily increasing in price. 

The data shows that the price of energy and food were most affected by inflation. In Bavaria, for instance, the price of heating oil has become 78,5 percent more expensive, while the price of petrol rose by 28,4 percent. Vegetables were 8,4 percent more expensive in September than in August, and meat 4,7 percent more expensive. Rents rose by an average of 1,7 percent. 

Economists believe post-corona recovery is causing temporary blip

Economists expect consumer prices to continue to rise in Germany in the coming months. According to the Deutsche Bundesbank, inflation could reach 5 percent by the end of the year, before remaining around 2 percent through to mid-2022. 

However, the European Central Bank (ECB) has indicated that it believes this is a temporary phenomenon, triggered by the rebooting of the global economy following the pandemic. Christine Lagarde, President of the ECB, said that the currently high inflation rates were due to temporary factors and warned people not to “overreact”.