When metal prices rise, it hits companies first. In the end, however, beverage cans in the supermarket can also become more expensive – then consumers will feel it in their wallets.

Bundesbank President Jens Weidmann:

IAs a rule, beverage cans are not exactly the main field of activity of a central bank chief: On Wednesday evening, Bundesbank President Jens Weidmann devoted his attention to this rather inconspicuous everyday product in order to describe the gradual nature of inflation.

Weidmann at the International Club of Frankfurt Business Journalists (ICFW) explained that raw material prices have risen significantly recently, making primary products more expensive in the industry. If companies pass their higher costs on to their customers, this could later also have an impact on consumer prices. “If, for example, metals rise in price, it affects the metal processing companies first,” said Weidmann. “In the end, however, the beverage cans in the supermarket could also become more expensive.”

The Bundesbank President had previously mentioned that a British mathematician had calculated that all the coronaviruses that are currently afflicting people have space in the smallest of spaces – in a beverage can.

Leap in inflation

Weidmann said the ECB is expecting inflation to “jump” this year. After 0.3 percent last year, she now expects an inflation rate of 1.5 percent. The jump is mainly due to special effects, including the withdrawal of the VAT cut in Germany and the sharp rise in energy prices. The depressed level of activity in the economy as a whole is dampening price developments. If it takes a little longer to overcome the pandemic, the forecasts for economic growth may have to be lowered; in this case the rise in inflation could also be delayed longer than expected.

But there are also “upside risks” for the inflation outlook, said Weidmann, citing the large savings made by people in lockdown: “Last year alone, private households in Germany saved 110 billion euros more than in 2019.” Many People just couldn’t have spent their money the way they wanted. That could lead to catch-up consumption after the crisis. In some sectors of the economy, temporarily greater demand could meet limited supply and cause prices to rise. This is conceivable for package tours or when going to restaurants. However, studies by the Bundesbank showed that rich people in particular would have saved a lot during the crisis; However, they often spend a smaller part of their income: “Therefore, their additional savings are less likely to be used for consumption, but more for building up wealth.”

The central banks would have to be very vigilant at the moment, said Weidmann: “It would be negligent to rule out that we will have to deal with more inflationary forces again in the future.” Andy Haldane, chief economist at the Bank of England, recently had a metaphor from Friedrich August von Hayek picked up: Keeping inflation under control is like trying to grab a tiger by the tail. The inflation tiger slept for many years. But now he has been awakened from his deep sleep. Haldane certainly sees the risk that the central banks acted too hesitantly and thus let the inflation tiger off the leash.