Kaufinger Strasse stores are seen closed due to the coronavirus disease (COVID-19) pandemic in Munich, Germany, February 5, 2021. REUTERS/Michaela Rehle/File Photo

German output is rebounding from its pandemic-induced slump and inflation could rise faster than currently expected, potentially affecting behaviour in the economy, the German central bank said on Friday.

The Bundesbank raised its growth and inflation forecasts for this year and the next, assuming that the coronavirus outbreak would be contained quickly and durably by the vaccination campaign and that restrictions will soon be relaxed.

It now expects the German economy to reach pre-pandemic levels as soon as next quarter, growing by 3.7% this year, 5.2% next year and 1.7% in 2023.

“The German economy is overcoming the pandemic-related crisis,” said Bundesbank President Jens Weidmann.

The German central bank also raised its forecasts for inflation for this year and the next,…

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