Inflation rate remains very high – economy

It was the first time in the history of the Federal Statistical Office: Last week, the authority from Wiesbaden had to postpone the publication of the current inflation data. The cause: The system collapsed in connection with the revision of the calculation of the consumer price index, which is carried out every five years.

On this Thursday morning the time had come, the new figures are in: The inflation rate in Germany was 8.7 percent in January compared to the same period last year, as the Federal Statistical Office announced in its first estimate. In December the figure was 8.6 percent. Due to the calculation revision, the statistical authority has not yet published any results for individual groups of goods or federal states.

This is also in the eurozone inflation still well above the monetary authorities’ target. Eurostat put the January value last week at 8.5 percent. Because of the aforementioned mishap, the European statistical authority had to rely on its own estimates for the German consumer price data. Now Eurostat has to update the value for monetary union accordingly.

Inflation rates for the euro zone are falling slightly. In December the value was still 9.2 percent and in November it was 10.1 percent. The meanwhile declining energy prices are responsible for this.

The ECB is fighting inflation – and raising interest rates

Nevertheless, little will change for consumers at first. The price level is not falling back to the level of a year and a half ago – on the contrary: the upward pressure on prices is continuing unabated, even if it looks like it will be less strong in the future. The ECB is aiming for an inflation rate of two percent in the medium term. However, the central bank itself predicts that the inflation rate will be 6.3 percent this year. 3.4 percent are expected for 2024.

The ECB would like to keep the inflation rate down by raising interest rates further. Most recently, the central bank increased the key interest rate by 0.5 percentage points to three percent. This is the highest level since 2008. A further increase is planned for mid-March – to 3.5 percent.

The currency watchdogs are particularly concerned about the so-called core inflation, in which the volatile energy, food, alcohol and tobacco prices are subtracted. It is 5.2 percent in the euro zone. This is the highest value since the monetary union was founded. The high core inflation is an indication that the energy sector is eating up into all areas of the economy.