Germany's inflation, measured by the consumer price index, is expected to rise by 1.9 percent year-over-year, indicating moderate pressure in August. However, on a month-over-month basis, prices are expected to dip slightly by 0.1 percent. This subtle decline might suggest stabilising or easing inflationary pressures in the short term. The harmonised index of consumer prices, which allows for EU-wide comparisons, mirrors this trend with a 2.0 percent annual increase and a 0.2 percent monthly decline.

Interestingly, core inflation, which excludes volatile food and energy prices, stands higher at 2.8 percent, suggesting that the underlying inflationary pressures remain relatively robust, driven by factors beyond just food and energy. The data indicate a nuanced economic situation in Germany, where headline inflation appears to moderate, while core inflation remains elevated, highlighting potential challenges in managing price stability and economic growth.

August's consensus is a year-over-year 2.2 percent versus 2.3 percent in July and 2.2 percent in June. The consensus for the HICP is 2.6 percent versus 2.6 percent and 2.5 percent in the prior two months.

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.