German Finance Minister downplays rapid rise in inflation

German Finance Minister Olaf Schultz played down German inflation soared in MayThis is called a “temporary phenomenon.”

The annual growth rate of prices in Germany rose to 2.4% last month, the highest in more than two years; the country’s central bank predicts that it may reach 4% later this year.

Scholz attributed this rise to the “adjustment effect”, and he pointed out that certain economic sectors have recovered from the coronavirus pandemic, which disrupted the supply chain and pushed up the demand for everything from raw materials to semiconductors.

“This situation will also affect prices,” he said.

Schultz also blamed the removal of virus restrictions. “The store has been closed for a long time, and this has had an impact on prices,” he told reporters. “When they rise, it’s not surprising.”

As major advanced economies recovered from the effects of the pandemic, inflation rates in many countries began to rise. Central banks of various countries are facing increasing pressure and need to consider shrinking the large-scale monetary stimulus measures introduced in response to the crisis in the past year.

Eurozone inflation Rise to 2% In May, it was higher than 1.6% in April. This is the first time the interest rate has exceeded the European Central Bank’s target of close to but below 2% in more than two years.

However, several European Central Bank policymakers, including European Central Bank President Christine Lagarde, said that the surge is only a temporary phenomenon, driven by a one-time effect, and is expected to subside next year.

Most economists believe that the Eurozone is unlikely to experience periods of persistently above target inflation, because millions of people who were unemployed, on vacation, or left the labor market during the pandemic have not yet resumed economic activity. The European Central Bank estimates that annual wage growth in the Eurozone in the first quarter was only 1.4%.

However, some Germans worry that higher inflation may occur.

In a recent open letter, including former Bavarian Chancellor Edmund Stoiber, former German Finance Minister Peer Steinbrück and Deutsche Bank Chairman Paul Ach Politicians and business people, including Paul Achleitner, warned that excessive inflation could lead to “great social unrest and distribution gaps.”

Scholz also pointed out that the impact of the recent value-added tax return to pre-pandemic levels is the driving factor for inflation trends. Berlin cuts VAT from 19% to 16% in the early stages of the pandemic Fiscal stimulus, But the reduction has expired at the end of last year.

Scholz said that when the value-added tax returns to its previous level, “this will automatically lead to a purely mathematical inflation effect, which should not be exaggerated.”

The gradual lifting of the blockade and the reopening of hotels and restaurants means that “prices are slightly higher than last year-this also has an impact.”

Scholz said that globalization has created a glut of cheap goods and services in most Western economies. “This trend has not been broken,” he said, implying that it will help keep inflation low.

However, he added that this may become a problem in the next few years. “The increasing prosperity of the world has led to the demand from the previous supply market, which will ultimately have an impact,” Scholz said. “But this is a phenomenon that we have to deal with more deeply than today in 10 or 15 years.”

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