Inflationary pressures continue to rise: German HICP inflation rises to 8.5 percent in July

According to the Federal Statistical Office (Destatis), the Harmonized Index of Consumer Prices (HICP) rose by 0.8 percent compared to the previous month and was 8.5 (June: 8.2) percent above the level of the same month last year. Economists polled by Dow Jones Newswires had expected monthly inflation of 0.4 percent and annual inflation of 8.1 percent.

In the national calculation, consumer prices increased by 0.9 percent over the month and 7.5 (7.6) percent over the year. The economists surveyed had forecast a monthly price increase of 0.7 or 7.4 percent.

Since the beginning of the war in Ukraine, energy prices in particular have risen noticeably, fueling inflation. In July, energy prices were 35.7 percent higher than in the same month last year. Food prices also rose at an above-average rate of 14.8 percent.

The Bundesbank expects the German HICP to increase by 7.1 percent in 2022. Because of the high inflation across Europe, the European Central Bank (ECB) has initiated an interest rate turnaround. Last week it raised its key interest rate by 50 basis points, putting an end to negative interest rates. In September, a further streamlining of the monetary policy expected. Raising interest rates makes borrowing more expensive and dampens demand, which in turn slows inflation.

DJG/apo/smh

FRANKFURT (Dow Jones)

Image sources: MichaelJayBerlin / Shutterstock.com