The head of the German Central Bank did not rule out a recession in the German economy

The energy crisis could lead to the beginning of a recession in the German economy this coming winter, said Joachim Nagel, president of the German Central Bank. AT interview Rheinische Post, the head of the Bundesbank also predicted inflation to rise to double digits.

“If the energy crisis reaches a climax, it is possible that a recession will begin in the coming winter” – said Nagel (quoted from the Saarbrücker Zeitung).

According to the head of the Bundesbank, the situation of 70 years ago, when inflation in Germany was expressed in double digits, may be repeated next autumn. Measures taken by the government to reduce inflation are cancelled, Nagel said. In particular, the discount on gasoline will cease to operate, which should increase the inflation rate by one percentage point.

The head of the German Central Bank is in favor of reducing VAT on gas, which will subsequently lead to lower prices. He admitted that inflation could reach 10% in autumn, and in 2023 this issue, in his opinion, would not lose its relevance.

In order to bring inflation back to target levels, on July 21, the European Central Bank decided raise the key rate immediately by 50 basis points – up to 0.5%, an increase with such a step occurred for the first time since 2011. The regulator then said that at the next meetings of the Board of Governors “further normalization of interest rates would be appropriate.”

Nagel urged the ECB to further raise rates, but did not talk about specific values. The next meeting will take place on September 8th.

“It is very important to keep medium-term inflation expectations at the level of two percent. I am convinced that the Governing Council of the ECB will take the necessary monetary policy measures,” said the President of the Bundesbank.

Annual inflation in 19 Eurozone countries in July accelerated to 8.9% after 8.6% a month earlier, updating the historical record, Eurostat said earlier, confirming its preliminary estimate published at the end of last month. In July 2021, the annual inflation rate was 2.2%. The growth of consumer prices in the European Union in annual terms also accelerated to 9.8% after 9.6% in June.

Despite the acceleration of consumer prices, EU GDP has not yet gone into negative territory. The European economy is growing for the second quarter in a row. In the first three months of 2022, the growth in annual terms was 0.5%, and in the II quarter – 0.7% (relative to the previous quarter), follows from the report of the EU statistics office, published on July 29.