When it comes to inflation figures, annual inflation is the big one. That’s a measure of how much costs have changed (typically risen) in the past 12 months.
In October last year, the annual inflation rate rose to 2.0 percent after two months of falling values. In November it edged up to 2.2 percent. Then, in December inflation climbed to 2.6 percent, DPA reported on Monday - the highest it's been since January 2024.
Compared to the 8.8 percent inflation that Germany saw at the peak of the cost-of-living crisis in autumn 2022, 2.6 percent doesn't look so bad. The European Central Bank (ECB) has set its inflation target rate for the euro area at two percent.
But the fact that inflation in Germany has begun to tick up again, after steadily shrinking for months has led to some concerns for consumers.
What's next for inflation?
Unfortunately for people living in Germany, economists don’t expect the inflation rate to fall below two percent in the coming months for a number of reasons.
Domestically, the increase in the CO2 price for gasoline, heating oil and gas will push up costs for consumers. There is also the increase in the price of the Deutschlandticket making monthly transport expenditure a bit higher even for many.
READ ALSO: German parliament secures future of Deutschlandticket in 2025
Based on these factors, economists expect the inflation rate to hover just over two percent for Germany this year, which is similar to what was seen in 2024.
But other risk factors could push up prices considerably more than that.
What are the risks?
A looming trade conflict with the USA could further fuel inflation, according to experts
US President-elect Donald Trump has announced high tariffs on imports from Europe.
If implemented, the European Union might be expected to respond with countermeasures, both of which would be detrimental to the German economy. But retaliatory tariffs in particular would push up consumer prices on imports coming from the US.
READ ALSO: How Trump’s tariffs could hit companies in Germany hard
Bundesbank President Joachim Nagel recently warned: "With tariff increases, we are making consumption more expensive and fuelling inflation."
The chief economist of VP Bank, Thomas Gitzel, suggests that high wage demands could also push up inflation this year, especially in the service industry.
He said "The discontinuation of inflation compensation bonuses is now to be compensated for by correspondingly high wage growth, according to the strategy of the trade unions."
With reporting by DPA.
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