German inflation remains one of, if not the key sticking point for the ECB in trying to sort out monetary policy setting. Price pressures in Europe's largest economy hasn't dropped off enough to allow for the central bank to take more steps in lowering interest rates further. And late last year, there were still stagflation concerns for the most part.
On that final point, a lot of the fears have been allayed in the past two months at least. The German economy has held up well with a notable recovery in the manufacturing sector especially. Adding to that, we are seeing price pressures ease back slightly as well. That being said, German core annual inflation continues to keep well above the 2% threshold.
The January reading saw core prices stick at 2.5%, with services inflation once again staying rather stubborn. Service prices were seen up 3.2% compared to the same month a year ago, rising at an above-average rate still. As such, that's keeping policymakers on their toes and alongside a somewhat similar picture in Spain is putting the central bank on the sidelines currently.
Looking to the February estimates, German headline inflation is expected to keep thereabouts again as in January. Headline annual inflation is estimated at 2.0%, marginally lower from the 2.1% reading last month. The EU-harmonised estimate is expected to be the same at 2.1%.
But again, all eyes will be on the core annual inflation estimate. And that will be the one that will matter most when viewing the report today.
Besides that, just be wary of the monthly figures with it expected to show another increase of 0.5% in January. If realised, that will mark the biggest monthly jump in headline prices since April 2024.
Here's the agenda for today:
- 0900 GMT - North Rhine Westphalia
- 0900 GMT - Hesse
- 0900 GMT - Bavaria
- 0900 GMT - Baden Wuerttemberg
- 0900 GMT - Saxony
- 1300 GMT - Germany national preliminary figures
Do note that the releases don't exactly follow the schedule at times and may be released a little earlier or later.
