German inflation hits nearly three-year high as energy prices surge

Overview

Updated 2 hours ago

Germans pay 14.9% more for energy than a year ago, and petrol hit a record price this month. Headline inflation rose to 3.3% in September, the highest since December 2023.

The jump traces to the Iran war and the blockade of the Strait of Hormuz, not to a broad price spiral. Core inflation held at 2.4% and services eased to 2.7%. Whether that containment lasts through winter now drives European Central Bank policy.

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

3.3%

September headline inflation

Year-on-year price rise, highest since December 2023, up from 2.9% in August.

14.9%

September energy price rise

Fuel and household energy, up from 10.5% in August and 8.3% in July.

2.4%

Core inflation

Excluding food and energy, unchanged for a third consecutive month.

3.2%

Forecast 2027 inflation

Leading German economic research institutes expect the rate to rise from 2.8% this year.

Voices

Curated perspectives — historical figures and your fellow readers.

Ever wondered what historical figures would say about today's headlines?

People Involved

Friedrich Merz

German Chancellor

Reintroduced fuel tax cut through end of 2026

Timo Wollmershäuser

Head of Economic Forecasting, Ifo Institute

Warns of winter electricity and gas price rises

Michael Heise

Chief Economist, HQ Trust

Says fuel tax cut will barely dent inflation

Organizations Involved

German Federal Statistical Office (Destatis)

National statistics agency

Publishes official inflation data; reported September 3.3% reading

Germany's federal statistics agency, which compiles the consumer price index and reported the September 3.3% inflation figure.

European Central Bank

Central bank

Facing decision on rate hikes as eurozone inflation rises

Sets monetary policy for the eurozone, now weighing how to respond to a supply-side energy shock.

Ifo Institute

Economic research institute

Expects companies to pass on energy costs

Munich-based economic research institute tracking German business expectations and prices.

Timeline

May 2026 October 2026

5 events Latest: Yesterday

Tap a bar to jump to that date

October 2026
Government reintroduces fuel tax cut
Latest Policy

Fuel tax cut takes effect, lowering taxes on petrol and diesel by about 17 cents per litre until year-end.
Yesterday
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%.
2 days ago
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.
August 1st, 2026
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.
July 1st, 2026
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.
May 1st, 2026

Scenarios

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.

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.

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.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

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.

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.