German Inflation Rises to 2.9% Ahead of ECB Meeting

German consumer prices rose by an annual 2.9% in August, up from 2.8% in July, marking the strongest inflation reading since April. The increase was primarily driven by education costs and energy prices, specifically fuel and heating oil, following the expiration of temporary relief measures in June.

State-level data from Bavaria, Saxony, and North Rhine-Westphalia also showed 2.9% year-on-year growth, while Baden-Wuerttemberg reported 2.6%. Monthly estimates between 0.1% and 0.2% suggest price pressures are broadening beyond simple base effects. These figures align with national projections of 2.95% to 3.0% and mirror similar inflationary trends in France and Spain.

The European Central Bank is now more likely to raise key interest rates during its September 10 meeting to move from a neutral deposit rate of 2.25% to a mildly restrictive monetary policy. This shift aims to combat inflation and prevent second-round effects from materializing in late 2026 or early 2027. While some officials argue for a September move, others indicate that the future rate path depends on emerging evidence of these second-round effects.