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Harmonized annual CPI increases to 1.6% in January compared to the 0.5% expected

  • Germany’s annual Harmonized CPI rose sharply in January amid changes in VAT.
  • EUR / USD remains in negative territory slightly below 1.2100.

Inflation in Germany, measured by the consumer price index CPI, was 0.8% in January, Destatis reported in its preliminary estimate Thursday. Further, the annual CPI rose to 1% from -0.3% in December.

Further, The Harmonized CPI consumer price index, the inflation indicator preferred by the European Central Bank (ECB), jumped to 1.6% annually and exceeded the market expectation of 0.5% by a wide margin. However, this surprising rise in inflation is largely attributed to VAT changes that took effect in January.

In July, Germany reduced VAT to 16% from 19% and the standard rate to 5% from 7% until the end of December due to the coronavirus crisis.


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