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Germany's inflation rises to 1.7% in January and is close to the ECB target

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The German Consumer Price Index (CPI) increased in January to 1.7% compared to 1.5% in December 2019, according to advanced data published Thursday by the Federal Statistical Office (Destatis). This means that inflation is close to the 2% target set by the European Central Bank (ECB) for the euro zone.

This also represents that German prices increased in January more than in the last six months. At an inter-monthly rate, the CPI stood at -0.6% in January, compared to 0.5% in the previous month, in line with market estimates.

Precisely, this Thursday from the German Government have asked the ECB to review its inflation target, considering that 2% is too high in today's globalized and digitized world, in which many companies prices can no longer increase significantly.

From Pantheon Macroeconomics they consider that "the V-shaped recovery of German inflation is complete, but we doubt that it disturbs the markets or the ECB." They also point out that the increase in January was mainly due to a biggest rise in the price of food and energy, up to 2.3% and 3.4%, respectively. On the other hand, the inflation of services fell to 1.5%, mainly due to the drop in prices on the combined holidays, offsetting higher inflation in transport, hotels and restaurants.

Most experts assume that the inflation rate will remain below 2% both this year and next. Specifically, the Ifo Institute expects it to stay at 1.5% in 2020 and should rise to 1.6% in 2021.

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