German inflation accelerates in August, core stabilises
German inflation accelerated to 2.9% in August, driven mainly by sharply higher energy costs linked to the Iran conflict. The increase was slightly higher than July’s 2.8%, but below economists’ forecast of 3.1%.
Energy inflation jumped to 10.5% in August from 8.3% a month earlier, making it the main force behind the overall increase. The German government now expects inflation to average 2.7% in 2026 and rise to 2.8% in 2027.
Despite the rise in headline inflation, underlying price pressures remained relatively stable. Core inflation, which excludes volatile food and energy prices, stayed at 2.4%. Services inflation also eased for the second consecutive month, falling from 2.9% to 2.8%.
The figures are being closely watched by the European Central Bank (ECB), which is preparing for a possible interest-rate increase at its September meeting. However, policymakers are reportedly reluctant to signal additional rate hikes after that, with future decisions likely to depend on whether high energy prices begin affecting other parts of the economy.
Economists warn that Germany’s inflation problem may not disappear quickly. Some expect headline inflation to climb above 3% again in the autumn and remain elevated through the end of the year. Higher transport costs and drought-related pressure on food and industrial prices could prolong the problem even further.
One economist warned that, under a prolonged period of elevated energy and other costs, German inflation could take until the end of 2027 to fall below the ECB’s 2% target. For households and businesses, the latest figures signal that the recent decline in price pressures could be facing another major setback.