A new study by the Deutsche Bundesbank examines the current trajectory of Germany's inflation rate compared to the high-inflation phase of 2022 following the coronavirus pandemic and the onset of the war against Ukraine. The authors analyze differing price developments across specific sectors, including energy, food, industrial goods, and services.
Due to the war in the Middle East, Germany experienced a noticeable increase in its inflation rate starting in early 2026. According to a preliminary estimate by the Federal Statistical Office, the year-on-year rate of the Harmonised Index of Consumer Prices (HICP) recently reached 2.8 percent in October.
The current situation has been shaped primarily by rising crude oil prices, according to the experts. Since the escalation in the Middle East began, crude oil prices have surged by nearly 70 percent, a magnitude similar to the high-inflation period of 2022. Aside from energy—and specifically petroleum products—consumer price momentum has not yet increased substantially in the current environment. However, experience from the 2022 high-inflation phase indicates that indirect effects from energy price shocks take time to materialize in food, non-energy industrial goods, and services.
Consumer price increases for gas, electricity, food, other goods, and services are expected to rise gradually. In addition, services had already been growing more expensive at an above-average rate prior to the Middle East conflict. Consequently, experts anticipate that Germany's inflation rate will remain noticeably elevated into the next year. While current indicators show little sign of inflation following a path as steep as the one seen from 2022 onward, the analysis indicates that a return to the 2 percent target will take time. The outlook remains heavily dependent on developments in the Middle East.
