German Inflation Rises to 2.9% Amid Higher Energy Prices

The German inflation rate rose to 2.9% in August, up from 2.8% in July, according to the latest estimate. The increase was mainly driven by higher energy prices, with oil prices being the main source of upward pressure on inflation.

Despite the higher energy costs, there is limited evidence that they are creating broader inflationary pressures across the economy. Services inflation continued to ease, falling to 2.8% from 2.9% in July, marking its second consecutive monthly decline.

ING notes that the current inflation environment is structurally different from the inflation surge seen in 2022. Selling price expectations in both the industrial and services sectors have fallen below pre-war levels, making it more difficult for companies to pass higher production costs on to customers.

The latest inflation figures strengthen expectations that the European Central Bank (ECB) will raise interest rates at its meeting next week. A second increase this year would leave the ECB's deposit rate within its estimated neutral range.