Chart of the Week : German inflation Chart of the Week : German inflation Chart of the Week : German inflation

Chart of the Week : German inflation

Christopher Dembik

Head of Macro Analysis

Summary:  Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance. This week, we focus on the first estimate of Germany’s inflation for January.

Click here to download this week's full edition of Macro Chartmania.

Germany's Harmonised Index of Consumer Prices (HICP) is out today. According to a first estimate, it stood at 5.1 % year-over-year in January, from 5.7 % in December. This is much higher than the economist consensus of 4.7 %. We had upside surprises in other eurozone countries. Spain January HICP decreased less than expected, at 6.1 % year-over-year versus anticipated 5.5 %, for instance.

On a positive note, the base effects from the VAT reversal no longer show in Germany’s year-over-year print. This was expected. But inflation remains elevated. The VAT base effects were partly offset by strong energy prices (gas notably) and transportation costs and some services too (packaged holidays and leisure). There is growing evidence that inflation is becoming more broad-based and that the services component could be the main headache in the coming months. Higher inflation is also passed on to households. This is negative for consumption. Since the beginning of the year, prices have started to increase, sometimes quite sharply. Think TV broadcasting prices and even various kinds of administrative prices. Looking ahead, we expect average inflation will be higher this year than last year in Germany. The peak in inflation is certainly not behind us yet and could be reached only in the next two to three months. And if the energy crisis is back in winter 2022, we don’t see how inflation could retreat to 2 % on average anytime soon. We forecast that German inflation will average 4 % this year with risks tilted on the upside.

Inflation surprises in the eurozone will likely force the European Central Bank (ECB) to revise upward its inflation projections in March. The ECB staff projected a 60 basis point drop in the euro area HICP in Q1 this year. This is way optimistic. But the ECB is likely to refrain from changing its monetary policy in the near term. The staff still considers the bulk of inflation is mostly related to the pandemic effect and the imbalances between demand and supply. This is partially true. There are other structural factors pushing inflation higher, such as the green transition and wage-price spiral in some sectors, in our view. This should not be neglected.

Following the release of the German inflation, the money markets have readjusted their expectations. They now price a 10 basis point ECB rate hike by September (which was not the case previously) and over 25 basis points by December. We think the ECB will face quite a communication challenge later this week. On one hand, it will have no choice but to confirm a more hawkish stance on inflation (it cannot dismiss the recent inflation figures) and on the other hand, it will have to keep the money market speculation on an upcoming rate hike in the coming months at bay. Expect volatility on EUR crosses on Thursday afternoon, for instance. 


The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.