Inflation continues to rise unabated, Wifo does not expect to peak until 2023

Inflation in Austria accelerated further in June. According to a quick estimate by Statistics Austria, the inflation rate is 8.7 percent, after 7.7 percent in May. The inflation rate has thus reached its highest level since September 1975. In the euro zone, consumer prices rose by 8.6 percent in June – the highest inflation since the introduction of the euro.

“In the meantime, inflation has picked up speed in almost all areas,” said Statistics Austria Director General Tobias Thomas yesterday. “In addition to renewed increases in fuel and heating oil prices, we are also seeing significant price increases in restaurants and in the food trade.”

For the Wifo economist Josef Baumgartner, the recent increase is only a surprise because prices are also increasing for services. “However, the development is still compatible with our annual forecast,” said Baumgartner in an interview with the OÖ Nachrichten. He does not expect any relaxation in the coming months. “We will see the peak at the turn of the year or in the first quarter.” He does not expect double-digit rates for Austria. “But we will most likely see a nine before the decimal point,” said Baumgartner.

Energy is still the main price driver. This does not only apply to Austria. In the entire euro zone, too, it is above all gas, fuel and electricity that are driving up the overall price level. Despite fuel discounts and other tax breaks in several euro countries, consumer prices rose by 8.6 percent in June compared to the same month last year, after an increase of 8.1 percent in May, as the statistics office Eurostat announced yesterday based on an initial estimate. This increases the pressure on the European Central Bank.

Inflation is now more than four times higher than the ECB’s target of two percent inflation as the optimal value for the economy. After years of ultra-loose monetary policy, the monetary authorities had announced that they would raise the most important interest rates by 0.25 percentage points this month – the first interest rate hike since 2011. However, many experts believe that this is not enough to stop the upward trend in prices. (hn)