Luxembourg yanks up inflation forecast for next year
Luxembourg's national statistics agency has forecast even higher inflation for next year than it previously predicted, as European economies prepare for a tough winter sparked by Russia's war and a cost-of-living crisis.
"Inflation will increase this autumn, with several increases in gas prices from October 2022 onwards and an increase in electricity prices in January 2023", Statec said in a press release on Thursday.
While the inflation rate will stay stable at 6.6% in 2022, Statec said, the forecast for next year has now been revised upwards, and will also hit 6.6%, a rise from an earlier estimate of 5.3%. Inflation is expected to peak at 8.7% in January next year, the statistics agency said.
Core inflation, which excludes more volatile items such as energy prices, would reach "historically high levels in 2022" at 4.3% and would strengthen further to 4.9% in 2023, Statec said.
This would lead to the threshold for indexation, when wages and pensions are automatically adjusted in line with inflation, being surpassed once more this year and twice next year, namely in the first and third quarter, Statec said.
Luxembourg's government is about to embark on a fresh round of talks with trade unions and employers to discuss how to tackle the cost-of-living crisis. Earlier this year, Luxembourg postponed one wage indexation, which is now due to take effect next April, and instead introduced other measures in attempts to assist households, such as tax credits.
In a more pessimistic cost-of-living scenario, up to five wage indexations could be possible within just 10 months, Prime Minister Xavier Bettel said at a press conference on Wednesday.
Bettel said he is open to all sorts of solutions, but hinted that this time he would not like to see another further postponement of the indexation. He expects an agreement to be found in later September or early October, but said more talks could be needed if the situation evolves further.
The European Union is also currently considering measures to lower energy prices, with Commission President Ursula von der Leyen proposing a windfall tax on profit-making energy companies which would go towards helping struggling households.