Germany's inflation picture in June 2025 reflects a steadying of consumer prices, with the consumer price index (CPI) rising by 2.0 percent year-over-year, unchanged from May's level. Month-over-month, prices showed no movement, suggesting a pause in inflationary pressures.

The harmonised index of consumer prices (HICP), used for cross-EU comparison, rose slightly by 0.1 percent on the month and matched the CPI's annual growth of 2.0 percent, indicating stable pricing dynamics across both national and European benchmarks.

However, beneath this headline stability, core inflationwhich strips out the more volatile food and energy pricesremained elevated at 2.7 percent. This suggests that underlying price pressures persist in sectors such as services and durable goods, keeping inflation above the European Central Bank's target.

Overall, while headline inflation has levelled off, the firmer core rate implies that the battle against inflation is not yet over. Policymakers may remain cautious, balancing optimism from easing price momentum with the need to monitor persistent pressures in core consumer spending categories. The latest updates take the RPI to minus 12 and the RPI-P to minus 1, meaning that economic activities are now slightly behind market expectations in Germany.

CPI expected to show increases of 0.2 percent on month and 2.1 percent on year in June versus 0.1 percent and 2.1 percent in May.

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.