German inflation jumps to 2.8% after fuel tax relief ends

German consumer prices rose by 2.8% in July, up from 2.3% in the previous month, the Federal Statistical Office said on Thursday, citing preliminary figures.

Economists had forecast inflation to accelerate following the end of the government's temporary fuel tax relief, introduced to counter rising energy prices caused by the war in Iran. The measure expired at the end of June after reducing fuel duty on petrol and diesel by just under €0.17 ($0.19) per litre in May and June.

The US-led war in Iran has continued to weigh on global energy markets. Oil prices briefly climbed back above $100 a barrel after the closure of the Strait of Hormuz, a key shipping route for the global oil and gas trade, before easing again. Economists warn higher energy costs could feed through to consumer prices in the coming months.

Energy prices in Germany were 8.3% higher in July than a year earlier, up sharply from 3.4% in May, while food prices rose by 0.4% from a year earlier for a third straight month, according to the statistical office. Service prices increased 2.9%, easing slightly from 3.1% in May and June.

Consumer prices rose 0.8% from June to July. In April, German inflation reached 2.9%, the highest level since January 2024 after the oil price shock triggered by the war in Iran.

Economists expect inflationary pressures to remain elevated in the coming months, with the European Central Bank warning that the full impact of higher energy costs has yet to work its way through the economy. Germany's central bank has said Germany's EU-harmonized inflation rate could rise above 3% in the months ahead.