Our December projections had inflation reaching just 1.4% in 2023 and core inflation reaching just 1.2%. [2]  While inflation is expected to rise this year, it will be driven by one-off statistical effects linked to the composition of the consumption basket, as well as base effects following on from previous energy price falls and the unwinding of the VAT cut in Germany.
This reduces their funding costs and facilitates banks’ capacity to increase credit supply, thus supporting consumption and investment. Hence, we are contributing to economic recovery and to inflation converging to rates consistent with price stability.