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German inflation rebounds as energy shock drives July CPI higher

Commerzbank said core inflation eased to 2.4% in July, but it expects core prices to fall only slowly because firms may pass on higher energy costs.

Reported · Written up by our desk · Central Banks

Commerzbank economist Dr. Ralph Solveen linked Germany’s July inflation rebound to a renewed energy price shock, noting the national CPI rose to 2.8% year over year after falling to 2.3% in June.

FXStreet reported that the increase was driven mainly by higher energy costs tied to conflict in the Persian Gulf, along with the end of fuel tax rebates. Solveen also said inflation excluding energy and food, or core inflation, edged down from 2.5% to 2.4%.

By category, Solveen pointed to services inflation slowing slightly to just under 3% in July, while goods inflation excluding energy and food was unchanged at 1.6%.

Looking ahead, Commerzbank said the short term inflation path depends heavily on Middle East developments, with oil prices and household energy costs likely to swing, while headline inflation could drop toward 2% only after hostilities end.

At the same time, Solveen warned core inflation may decline only slowly because companies are expected to increasingly pass through higher energy costs to customers.

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