German inflation rose to 2.9% year-on-year in August, up from 2.8% in July and 2.3% in June, according to the Federal Statistical Office’s preliminary estimate. The increase matched the median forecast of economists surveyed by Reuters, who had expected a 2.95% reading.
Energy prices remained the primary driver of inflation, with fuel and heating oil costs rising more sharply than crude oil itself due to disruptions in transport routes and reduced refinery capacity linked to the Middle East conflict. Analysts noted that the impact of energy price shocks has yet to fully filter through to broader price dynamics, with producer prices indicating sustained cost pressures on goods.
Economists offered diverging assessments of the outlook. Michael Heise, chief economist at HQ Trust, warned that inflation would likely remain elevated absent a significant easing in energy markets, citing stable service-sector inflation at 2.8% year-on-year. He added that a European Central Bank rate hike at the September policy meeting had become more probable.
Jörg Krämer, chief economist at Commerzbank, emphasized that even if oil flows resumed unimpeded through the Strait of Hormuz, inflation would likely stay well above the ECB’s 2% target for an extended period. He highlighted the risk of second-round effects as companies pass on accumulated energy cost increases to consumers, prolonging inflationary pressures.
Thomas Gitzel, chief economist at VP Bank, pointed to tentative signs of moderation in service-sector inflation, which eased to 2.8% from 2.9% in July. The core inflation rate, excluding energy and food prices, held steady at 2.4% month-on-month. However, Gitzel cautioned that indirect effects from energy cost pass-through could intensify in coming months, potentially pushing core inflation higher. He also anticipated a 25-basis-point ECB rate increase in September as a preventive measure.
