Key facts
- German inflation accelerated to 2.8% year-on-year in July, aligning with forecasts.
- Energy prices, influenced by the Iran conflict, drove the increase in inflation.
- Core inflation, excluding food and energy, slightly decreased to 2.4% from 2.5%.
- Preliminary data from four German states indicated a rise in inflation.
- Euro zone inflation is projected to reach 2.9% in July, up from 2.8% in June.
- The European Central Bank maintained its interest rates in July but left the door open for future tightening.
German inflation accelerated to 2.8% year-on-year in July, driven by rising energy prices, according to preliminary data from the federal statistics office. This figure aligns with the 2.8% forecast from analysts polled by Reuters and represents an increase from June's 2.4% rate. The surge in energy inflation to 8.3% from 3.4% in the previous month was a primary driver.
However, core inflation, which excludes volatile food and energy prices, saw a slight decrease, falling to 2.4% from 2.5% in June. These German figures precede the release of euro zone inflation data, which economists expect to come in at 2.9% for July, a marginal rise from June's 2.8%.
The European Central Bank maintained its benchmark interest rates in July. However, policymakers indicated that further tightening measures could be considered in the coming months, partly due to the escalating conflict in the Middle East and its impact on energy prices.