German Inflation Edges Up in August as Energy Costs Surge
German inflation rose to 2.9% in August, driven by a surge in energy prices, though the increase was below expectations.
German consumer prices rose at a slightly faster pace in August, with inflation reaching 2.9% year-on-year, up from 2.8% in July, according to preliminary data released on Monday. The increase was driven primarily by a sharp jump in energy costs, which rose 10.5% compared to the same month last year, up from 8.3% in the previous month.
The latest figure came in below market expectations, as analysts had forecast a 3.1% rise in the EU-harmonised consumer price index. Core inflation, which strips out volatile food and energy prices, remained steady at 2.4% from the prior month, suggesting underlying price pressures have stabilised.
The acceleration in energy prices has been attributed to the ongoing conflict in Iran, which has pushed up costs for raw materials and fuel. The German government now projects inflation to average 2.7% for the full year 2026 and 2.8% in 2027.
The German data arrives ahead of the euro zone inflation release scheduled for Tuesday. Economists expect the bloc's inflation to rise to 3.3% in August, up from 2.9% in July. European Central Bank policymakers are reportedly prepared to raise interest rates at their September meeting to counter the economic side-effects of the Iran war, though there is little appetite to signal further tightening beyond that.