It looks like Germany has weathered the storm. Prices, which recently skyrocketed, have finally eased their pace. Analysts agree that the sharpest peak of inflation is over. However, they warn that this calm may be more of a pause than a permanent change.
Headline inflation currently hovers just above the coveted 2% mark, the gold standard for central banks. As always, however, the devil is in the details: inflation in the services sector remains stubbornly high, verging on what would be considered provocative by central bank standards.
Analysts are proceeding with caution. While the situation has stabilized, the foundation remains fragile. Service prices are rising, wage growth is slowing, geopolitical tensions are high, and the energy market is struggling.
The outlook for energy prices appears more optimistic heading into 2026, particularly with promised cuts to electricity tariffs. Still, in the grand scheme, this is more of a band-aid solution than a long-term fix.
Stripped of volatile swings in food and fuel prices, core inflation is indeed on a downward trend. Yet analysts caution against expecting a return to the "good old days" of 1% inflation and zero interest rates. The world has changed, as have the price tags.
Persistent inflationary triggers remain geopolitics, climate-related spending, the localization of production facilities, and ever-climbing domestic costs, ranging from defense to decarbonization. Each factor adds weight to the inflation scale.
According to analysts, another inflation shock is not on the horizon, but complacency would be premature. Germany may be entering a new phase where inflation no longer startles but does not retreat either. It simply lingers.
