German Inflation Rate Also Enters 6% Range... ECB Quantitative Easing Policy Controversy Expected to Grow

[Asia Economy Reporter Park Byung-hee] Following the United States, Germany's consumer price inflation rate has also entered the 6% range.

Major foreign media reported on the 29th (local time) that Germany's consumer price inflation rate for November reached 6%, the highest since 1992. Previously announced U.S. consumer price inflation also entered the 6% range for the first time in 30 years, recording 6.3% in October.

As Germany's inflation rate soars to the highest level in 30 years, controversy over the European Central Bank's (ECB) quantitative easing policy, the Pandemic Emergency Purchase Programme (PEPP), is expected to intensify.

The U.S. central bank, the Federal Reserve (Fed), recently began tapering (reducing asset purchases) to control inflation. However, the ECB plans to continue the PEPP as originally scheduled until March next year. ECB President Christine Lagarde said last week, "Taking a tightening policy in response to the current surge in inflation would be a wrong policy response."

There is room for Germany's inflation rate to ease. Recently, Germany has strengthened lockdown measures again due to the spread of COVID-19 infections. With the Omicron variant also spreading, if lockdown measures are prolonged, consumption may shrink and prices may fall.

In January of the new year, the base effect from the value-added tax (VAT) reduction will also disappear. The German government lowered the VAT rate by 3 percentage points after the COVID-19 pandemic last year but restored it to the original rate starting January this year.

Isabel Schnabel, an ECB Executive Board member, said in an interview with Germany's ZDF on the same day, "Germany's November inflation rate will be the peak."

Spain's November consumer price inflation rate, announced on the same day, also recorded 5.6%, the highest since 1992, and Belgium's November inflation rate also showed 5.6%.

Eurostat, the statistical office of the European Union (EU), is scheduled to announce the Eurozone's November consumer price inflation rate on the 30th. It is expected to record 4.4, more than double the ECB's monetary policy target of 2%, and the highest in 13 years.

This content was produced with the assistance of AI translation services.