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Growth of inflationary expectations in Germany

The growth of inflationary expectations in Germany poses a significant challenge for businesses and policymakers.

Recent Trends:

  • Upward Trajectory: Data suggests that inflationary expectations in Germany have been on an upward trajectory in recent months. This is reflected in surveys conducted by the Deutsche Bundesbank among firms and consumers.
  • Peak Not Yet Reached?: It's uncertain whether inflationary expectations have reached their peak. The ongoing war in Ukraine, global supply chain disruptions, and tight labor markets all contribute to inflationary pressures.

Potential Impacts:
  • Self-Fulfilling Prophecy: If businesses and consumers expect higher inflation, they might adjust their behavior in ways that can actually fuel inflation. For example, businesses might raise prices preemptively to protect their margins, and consumers might increase spending now out of fear of even higher prices later.
  • Central Bank Policy: The European Central Bank (ECB) is likely to be more hawkish on monetary policy in response to rising inflation expectations. This could mean raising interest rates or reducing quantitative easing programs, aiming to slow down economic activity and curb inflation.
Since inflationary expectations are rising in Germany, there are instruments you can consider to hedge your German business, such as:

Euro Short Position: If you expect the Euro to weaken against a stronger currency like the US Dollar (USD) due to inflation, you could take a short position on the Euro. This means you would borrow Euros and sell them, profiting if the Euro weakens and you repurchase them later at a lower price. Caution: This strategy involves currency risk and potential for losses if the Euro strengthens.

Tip. Our algorithms gave us Sell signal in January 2024 with potential goal - 1,05403.
Important Note: This analysis is based on readily available technical indicators and should not be considered financial advice. Always conduct your own research before making any investment decisions.
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