Prices posted a final 1.0 percent monthly increase in January, matching the provisional estimate and so leaving the annual inflation rate unrevised at 8.7 percent. This was up from December's markedly downwardly revised 8.1 percent and just short of the 8.8 percent high now shown for October and November. Note that today's update uses a new 2020 base year versus 2015 previously and the switch has significantly changed the 2022 inflation profile.

The January flash HICP was also unrevised and so still shows a 0.5 percent rise versus December and a yearly rate of 9.2 percent, down from 9.6 percent at year-end but still fully 7.2 percentage points above the ECB's target.

Within the CPI, goods inflation was 12.7 percent reflecting a particularly hefty rate for non-durables (17.0 percent). Durables (6.0 percent) were a good deal softer. Services (4.5 percent) were boosted by maintenance and repair of dwellings (16.9 percent) and catering services in restaurants and cafes (10.9 percent). Food (20.2 percent) was again especially strong but slightly weaker than in December (20.4 percent) and below the energy rate (23.1 percent) which remained very high despite relief measures. Excluding food and energy, inflation stood at 5.6 percent, up from 5.2 percent at year-end.

The final January results and associated back revisions will not sit at all well with the Bundesbank which will certainly be pushing for another 50 basis point hike in ECB interest rates next month. More generally, today's report puts the German ECDI at 12 and the ECDI-P at 19, both measures signalling on balance a modest degree of upside surprises in overall economic activity.

No revisions are expected to the provisional data.

The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. A provisional estimate, with limited detail, is released about two weeks before the final data are reported.

The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Germany where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, Germany's interest rates are set by the European Central Bank.

Germany like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The preliminary release is based on key state numbers which are released prior to the national estimate. The states include North Rhine-Westphalia, Baden-Wuerttemberg, Saxony, Hesse, Bavaria and Brandenburg. The preliminary estimate of the CPI follows in the same day after the last of the state releases. The data are revised about two weeks after preliminary release.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.