Germany: Annual HICP falls to 5.1% in January vs. 4.7% expected

• German annual HICP fell in January to 5.1% from 5.7% last month but was well above the 4.7% expected reading. 
• The euro did not react to the latest German inflation figures. 

Germany’s Harmonized Index of Consumer Prices (HICP), which is the ECB’s preferred gauge of inflation, fell to 5.1% YoY in January from 5.7% in December, above consensus forecasts for a 4.7% reading, according to a preliminary estimate published by Destatist. The MoM change in HICP was 0.9%, well above consensus forecasts for a 0.4% decline in January and an unexpected acceleration from the 0.3% MoM gain in December. 

Meanwhile, the headline Consumer Price Index (CPI) rose at an annual pace of 4.9% in January, down from December’s 5.3% reading, but well above the 4.3% consensus forecast. As with the HICP measure, the MoM change in CPI saw an unexpected rise in January, gaining 0.4% versus consensus expectations for a 0.3% decline, marking a slight deceleration from December’s 0.5% MoM gain.  

Market Reaction

The euro has not reacted to the latest German inflation figures, which, though stronger than expected, confirmed a drop-off in the YoY rate of inflation that the ECB had been predicting. Some will argue this data plus the Spanish data earlier in the session will strengthen the ECB’s conviction that inflation in the Eurozone is “transitory” and not worthy of responding to with tighter policy.