• Headline German HICP showed prices rising 8.7% YoY, well above the 8.0% expected. 
• The euro didn't react, even though the data will make ECB policymakers even more uncomfortable. 

The preliminary estimate of annual inflation in Germany according to the Harmonised Index of Consumer Prices (HICP) rose to 8.7% in May, data released by Statistisches Bundesamt Deutschland revealed on Monday. That was above the expected rise to 8.0% from 7.8% in April. MoM, prices rose 1.1%, the HICP revealed, well above the expected drop to 0.5% from 0.7% in April. The HICP is the ECB's preferred gauge of Eurozone price pressures. 

The alternate Consumer Price Index (CPI) showed prices in Germany rising at a YoY pace of 7.9% in May, up from 7.4% a month earlier and above the expected rise to 7.6%. MoM, prices were up 0.9%, well above the expected drop to 0.5% from a 0.8% increase in April. 

Market Reaction

Regional inflation figures released by various German states earlier in the day suggested the likelihood of an upside surprise and so the euro has not reacted to the latest data. Nonetheless, the latest figures will not sit comfortably with the ECB, and may strengthen the argument for a 50 bps rate hike in July.