Inflation confirmed at 2.6% as fuel tax cut limits price hikes

Germany's inflation rate slowed to 2.6% in May as a fuel tax cut helped to limit the rise in consumer prices caused by the war in Iran. 

The Federal Statistical Office on Friday confirmed its flash estimate, showing inflation falling from 2.9% in April - the highest level since January 2024 - amid the ongoing conflict in the Middle East.

Energy prices were 6.6% higher last month compared to May 2025, a significant drop from the 10.1% figure in April. 

The Wiesbaden-based agency said the government's decision to cut taxes on petrol and diesel by €0.17 ($0.20) per litre likely helped to limit inflation, with consumer prices actually falling by 0.2% month-on-month in May. 

"Energy prices remained at a high level as a result of the Iran war, although the reduction in the tax on motor fuels, which has applied since the start of May, is likely to have had a dampening effect on the rise in prices," said the office's president, Ruth Brand.

Uncertainty remains high, however, with the United States and Tehran still locked in negotiations to end the war after days of mutual strikes.

The German Council of Economic Experts expects annual inflation to hit 3% this year, but the independent body has warned that the figure could reach 3.5% if supplies of crude oil and gas from the Gulf continue to be restricted by the blockade of the Strait of Hormuz. 

Prices for food and services could rise in Germany as companies pass on higher energy, production and transport costs.

In addition, the government's two-month fuel tax cut is set to expire at the end of June, with Chancellor Friedrich Merz's administration signalling this week it will not extend the rebate due to budgetary concerns.