The inflation ghost is back

In the Eurozone, the inflation rate fell only very slightly to 8.5 percent in February. The range among the individual countries is very wide: it extends from a rate of 20.1 percent at the peak in Lithuania to a low of 4.8 percent in Luxembourg. In some countries, such as Germany, France, Spain and the Netherlands, inflationary pressure has even increased again somewhat. This was primarily due to the very high price increases for food and energy. The fact that the inflation rate has stubbornly remained at a high level at the beginning of the year is somewhat surprising, since not only have the prices for energy raw materials fallen significantly, but also many agricultural raw materials as well as food and luxury foods are cheaper on the international commodity markets than a year ago. In this respect, there are indications that companies are taking advantage of their customers' high willingness to pay, on the one hand to recoup earlier cost increases that were not passed on in full, or on the other hand to take advantage of the moment to increase their profit margins.

The current high inflation rates will be countered by the ECB with further interest rate hikes. Above all, the further rise in core inflation will be watched with a wary eye and will bring the "hawks" in the ECB Governing Council, who advocate stronger interest rate hikes, into action.

The turnaround in interest rates in 2022 has left clear traces on the German real estate market. For example, the interest rate for a mortgage loan over 10 years has risen from a good one percent at the end of 2021 to just under four percent. In order for the monthly instalment to be the same at an interest rate of four percent as it would be at an interest rate of 1.5 percent, the loan amount would have to fall by around 20 percent - and with it the purchase price!