German inflation falls to 2.8% in October

Germany's inflation rate fell sharply in October as renewed fuel tax relief helped ease the burden on consumers, according to preliminary figures released by the Federal Statistical Office on Friday.

Consumer prices rose by 2.8% year-on-year, down from 3.3% in September, when inflation had reached its highest level since December 2023.

The decline was largely driven by slower increases in energy prices, helped by the government's decision to reintroduce fuel tax relief in October.

Fuel and household energy prices were still 12.2% higher than a year earlier, but the pace of increase slowed from nearly 15% in September.

Food prices rose by just 0.4% year-on-year in October, while services, including package holidays and restaurant visits, became 2.5% more expensive, marking a further slowdown from previous months.

Fuel tax relief eases price pressures

The German government introduced its second fuel tax reduction of the year on October 1 in an effort to ease the burden on motorists.

The measure, which runs to the end of 2026, reduces energy taxes on petrol and diesel by around €0.14 ($0.16) per litre. Including value-added tax, the relief amounts to as much as €0.17 per litre, according to the government.

But energy prices are still significantly higher than a year earlier - and the roiling conflict between the United States and Iran continues to pose risks to the inflation outlook.

Germany's Bundesbank has warned that energy prices are likely to remain elevated despite the temporary fuel tax reduction. Higher transport, storage and raw material costs could also gradually feed through to consumer prices.

Leading German economic research institutes also forecast that inflation in Germany will rise from 2.8% this year to 3.2% in 2027.