Germany's inflation rate rises to record 10.4 pct in October
Christian Fernsby ▼ | October 29, 2022
Germany's annual inflation rate climbed to 10.4 percent in October, the highest on record since 1990, according to preliminary figures published by the Federal Statistical Office (Destatis).Article continues below
Energy prices in Europe's largest economy soared 43 percent year-on-year and continued to have a "substantial impact on the inflation rate," Destatis said. Food prices also outgrew overall inflation levels and were up 20.3 percent.
In response to the energy crisis, the German government cut the value-added tax (VAT) on natural gas supplies from 19 percent to 7 percent. The measure took effect retroactively from the start of October and was likely to have a "downward effect on the inflation rate," Destatis said.
In addition to inflation relief packages totaling 95 billion euros (95 billion U.S. dollars), the German Bundesrat (upper house of Parliament) on Friday approved a proposed "protective umbrella" of up to 200 billion euros. The fund can be used for capping electricity and gas prices.
As a result of the combined measures, the German government expects annual inflation in 2023 to drop to 7 percent, down from 8 percent predicted for this year.
"These packages will have an impact, also to curb inflation," Minister for Economic Affairs Robert Habeck said earlier this month when presenting the outlook.
Inflation in the eurozone also continued to rise and peaked at 10 percent in September, according to the latest official figures. The European Central Bank (ECB) reacted by raising its key interest rate to 2.0 percent in three steps.
"We expect to raise interest rates further to ensure the timely return of inflation to our 2 percent medium-term target," ECB President Christine Lagarde said on Thursday when announcing the latest 0.75-point rate hike. ■ What to read next
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