Germany: inflation



The graphic above shows the movement of Germany’s consumer prices index of inflation since 1992. At the beginning at 1992 the rate stood at 5.08 per cent.

Post-1992 inflation fell to a low of 0.57 per cent in 1999, before rising again during the 2000s. In 2008 it peaked at 2.63 per cent, dropping markedly to 0.31 per cent by the beginning of 2009. It then began to rise again.

The German chancellor Angela Merkel’s reaction to the crisis in the eurozone has been influenced in part by her reluctance to countenance any measure that may see inflation rates rise — Weimar-period hyperinflation still haunts German policymakers.

Germany has two measures of inflation — the CPI rate shown above, which measures consumer prices, and a second measure, the GDP deflator, which measures inflation against the entire economy.

Inflation refers to the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.