German inflation hits nearly three-year high as energy prices surge
Money Moves
October inflation was confirmed at 2.8%, down from 3.3%, as a fuel tax cut took effect. Energy prices still rose 12.2%, and economists expect inflation back above 3% in early 2027.
German inflation was confirmed at 2.8% in October, down from 3.3% in September, the Federal Statistical Office said on November 11. The drop came mostly from a fuel tax cut that took effect October 1, though energy prices still rose 12.2% from a year earlier.
Core inflation, which strips out food and energy, slowed to 2.1%. Heating oil was up 84.5% and petrol 28.9%, while electricity fell 5.2%. The Bundesbank and Commerzbank expect inflation to climb back above 3% around the turn of the year, when the fuel discount expires.
Why it matters
If energy costs spread to other prices, the ECB raises rates and German households face a second winter of soaring heating bills.
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Key Indicators
2.8%
October headline inflation
Confirmed final figure, down from 3.3% in September. Consumer prices fell 0.2% from the previous month.
12.2%
October energy price rise
Year on year, down from 14.9% in September, as the fuel tax cut took effect.
2.1%
Core inflation
Excluding food and energy, down from 2.4% in September.
84.5%
Heating oil price rise
October, year on year, up from 74.9% in September.
6.7%
September producer prices
Factory-gate prices, the fastest annual rise since March 2023, up from 4.6% in August.
2.50%
ECB deposit rate
Raised from 2.25% in September, as eurozone inflation ran at 3.8%.
14 events
Latest: Today
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November 2026
Destatis confirms October inflation at 2.8%
TodayData
Final figures confirm the preliminary estimate. Consumer prices fell 0.2% from September; energy rose 12.2% year on year, with heating oil up 84.5% and motor fuels up 28.9%, while electricity fell 5.2%.
October 2026
Flash estimate puts October inflation at 2.8%
Data
Destatis estimates inflation fell to 2.8% from 3.3%, below the 3.0% expected. Energy rose 12.2%, core inflation eased to 2.1%, and food rose 0.4%.
Q3 economic growth beats expectations
Data
Preliminary data show Germany's economy grew more than expected in the third quarter, Reuters reported. The fuel tax cut is expected to support the fourth quarter.
Bundesbank study warns inflation will stay elevated into 2027
Report
A Bundesbank study said the oil-price rise since the Middle East conflict resembles the 2022 shock, and that indirect effects will reach food, goods and services with a delay, keeping inflation above 2% into next year.
ECB holds rates and hints at December hike
Policy
The European Central Bank left interest rates unchanged and clearly hinted at another hike in December, Reuters reported.
Bundesbank says recovery has stalled and inflation will stay high
Report
In its October report the Bundesbank attributed a pause in the German recovery partly to low Rhine water levels and fuel-tax effects, and said inflation should stay elevated as energy costs pass through to food, goods and services. It flagged the 2027 health reform and the expiring fuel discount as upward risks.
Producer prices rise 6.7%, fastest since March 2023
Data
Factory-gate prices jumped 6.7% year on year in September, above the 6.2% forecast, driven by a 14.9% rise in energy costs. Intermediate goods were up 6.4%.
Eurozone inflation surges to 3.8%
Data
Eurozone-wide inflation jumped to 3.8% in September from 3.2% in August, above the 3.6% forecast, driven by fuel and natural gas costs. Core inflation accelerated to 2.5% from 2.4%.
Government reintroduces fuel tax cut
Policy
Fuel tax cut takes effect, lowering the energy tax on petrol and diesel by about 14 cents per litre until year-end, or up to 17 cents with VAT.
Government orders more gas purchases for storage
Policy
Economy Minister Katherina Reiche instructed state-owned Sefe to increase natural gas purchases for storage, coordinated with Chancellor Merz, citing geopolitical risks.
September 2026
German inflation hits 3.3%, highest since December 2023
Data
September headline inflation reaches 3.3% as energy prices rise 14.9% year-on-year. Core inflation holds at 2.4%.
August 2026
Import prices rise fastest since late 2022
Data
German import prices jump about 8% year-on-year in August, pointing to delayed pressure on consumer prices.
July 2026
Energy inflation accelerates to 8.3%
Data
July inflation reaches 2.8% as energy prices climb 8.3% year-on-year, up from 3.4% in June, as Iran war effects hit.
May 2026
First fuel tax cut of 2026 takes effect
Policy
Government applies a temporary fuel tax cut for May and June, easing pump prices before it expires.
Scenarios
1
ECB raises rates in December as insurance against second-round effects
Likely
Resolves by End of 2026
Discussed by: ING Think, MUFG Research
With eurozone headline inflation near 3.6% and economic activity resilient, the ECB faces pressure to act even though core inflation stays subdued. ING analysts describe a December hike as insurance — the damage of raising is lower than the damage of not acting. MUFG says an October hike is still plausible given the salience of energy and food prices for household inflation expectations.
2
War winds down, oil prices fall, inflation cools through 2027
Possible
Resolves by Q1 2027
Discussed by: ING Think base case
ING assumes the war continues but oil prices come down toward late 2026 and knock-on effects stay limited. In that case headline inflation remains above 3% until early 2027, then falls below 2% by the end of 2027, with no ECB hikes in 2027. Analysts note consumers' willingness to pay higher prices is far lower than in 2022, making broad pass-through hard for companies.
3
Energy shock spreads to core inflation, forcing sustained ECB tightening
Possible
Resolves by Q2 2027
Discussed by: Ifo Institute, import price data
Import prices rose about 8% in August, the fastest since late 2022, and Ifo expects companies to pass energy costs on to customers. Gas storage below 60% — historically low for the season and below 2022 crisis levels — raises the risk of winter price spikes. If core inflation breaks above 3%, the ECB stops treating this as a contained supply shock and hikes repeatedly.
4
German inflation stays above 3% into 2027 as the fuel discount expires
Likely
Resolves by Q1 2027
Discussed by: Deutsche Bundesbank
The Bundesbank expects energy prices to remain high and to feed through to industrial goods, food and services with a lag. It also points to the health reform taking effect in early 2027, which raises co-payments for medicines and hospital services, and to the fuel discount running out at the end of 2026.
Historical Context
2 moments from history that rhyme with this story — and how they unfolded.
1 of 2
October 1973 – March 1974
OPEC Oil Embargo (1973-74)
After the Yom Kippur War, Arab members of OPEC cut oil exports and embargoed the United States and its allies. Oil prices roughly quadrupled, from about $3 to nearly $12 per barrel, within months. Inflation across industrial nations jumped while growth stalled — the birth of the term stagflation.
Then
Central banks initially treated the oil spike as temporary and kept policy loose, feeding a wage-price spiral that took years to break.
Now
The episode pushed central banks toward aggressive tightening and, eventually, inflation targeting as the standard policy framework.
Why this matters now
Today's shock from the Strait of Hormuz blockade has the same supply-side shape: a single input price jumps while underlying demand stays weak. The 1970s lesson — that treating a supply shock as temporary can let it embed — is the reason some ECB members want to hike now.
2 of 2
February 2022 – 2023
Russia-Ukraine Energy Crisis (2022)
Russia cut natural gas supplies to Europe after invading Ukraine, sending German gas and electricity prices to records. German inflation climbed steeply through 2022, and the ECB's delayed response — hiking only after inflation had run high for months — became a sore point.
Then
The ECB raised rates repeatedly through 2022 and 2023 as inflation eased slowly, falling to 3.8% by December 2023.
Now
The episode left a lasting caution inside the ECB about responding too late to energy-driven price shocks.
Why this matters now
ING analysts note memories of 2022's delayed response weigh on ECB decisions today, even though this shock has so far shown only limited knock-on effects. Gas storage is now below the level seen during the 2022 crisis, sharpening the comparison.
