Germany’s August harmonized CPI hits 2.9% annually as energy costs keep pressure on ECB

Germany’s preliminary harmonized index of consumer prices for August came in at 0.2% month-on-month and 2.9% year-on-year, according to flash estimates from the Federal Statistical Office (Destatis). The numbers landed almost exactly where economists expected. The annual figure represents a slight uptick from July’s final reading of 2.8% year-on-year, which itself was a jump from June’s 2.4%. Energy is still the main villain The bulk of Germany’s inflationary pressure continues to originate from the energy sector. July data showed energy prices surging between 7.3% and 8.3% year-on-year, a range driven by two factors working in tandem. Geopolitical tensions in the Middle East have kept global energy markets on edge. And the expiration of temporary fuel tax reductions at the end of June removed a buffer that had been artificially suppressing pump prices for months. Strip out energy and food and core inflation metrics have been rising at a more modest pace, suggesting that the underlying economy isn’t overheating so much as it’s paying more for fuel. The ECB’s uncomfortable math The ECB targets price stability at around 2% over the medium term. Germany’s 2.9% annual reading sits near...