Germany’s Bundesbank raised its outlook for German inflation today and predicted economic growth would slow in 2009 after a solid expansion in 2008.
In updated economic forecasts, the Bundesbank predicted annual harmonised inflation of 3.0 per cent this year and 2.2 per cent in 2009.
This is sharply higher than expectations at the last forecast round in December of inflation of 2.3 per cent this
year and 1.5 per cent in 2009.
The central bank raised its forecast for 2008 economic growth to 2.0 per cent on a workday-adjusted basis, from 1.6 per cent previously. But it cut the 2009 forecast to 1.4 per cent, from 2.0 per cent.
Risks to growth were balanced but the outlook for prices had become "decidedly gloomier" of late, the Bundesbank said.
"After a strong start to the year, the German economy will grow at a more subdued pace before gaining momentum again at the end of this year or early 2009," it said in a statement.
"At the same time, the currently high pressure on prices is unlikely to weaken again significantly until 2009, although the upside risks clearly predominate."
The Bundesbank forecasts are prepared as part of broader central bank economic forecasts for the 15-nation euro zone, which were released by the European Central Bank yesterday and showed a similar picture.