Why Is Inflation Accelerating in Germany and France This September?

Germany and France both reported accelerating inflation in September, adding pressure on the European Central Bank’s cautious approach to monetary policy.

While economists had hoped disinflation would resume, the latest data shows a reversal, sparking new debate on what is fueling the price surge in two of Europe’s largest economies.

The renewed price momentum surprised analysts, especially as both countries face ongoing economic headwinds and sluggish consumer demand.

However, core sectors such as services and persistent state-level trends appear to be driving headline numbers higher.

What Drove Inflation Higher in Germany?

German consumer prices jumped 2.4% year-over-year in September, outpacing expectations and marking a second consecutive monthly rise after a period of disinflation.

The jump brought an end to several months of moderating inflation, signaling underlying resilience despite slower economic growth.

North Rhine-Westphalia, Germany’s largest state, saw its annual inflation rate tick up to 2.3% from 2.0% in August.

Analysts point to services and sustained price levels in non-volatile categories as key drivers of the national uptick, reinforcing the signal that temporary drops in energy prices are no longer masking continued inflation elsewhere.

Did you know?
Germany’s state of North Rhine-Westphalia publishes inflation figures before the national average, often hinting at the nationwide trend.

How Did French Inflation Beat the Trend?

French consumer prices climbed 1.1% year-over-year in September, up from 0.8% the previous month, according to EU-harmonized data.

Although below consensus forecasts, this marked the fastest increase since early 2025 and was supported primarily by persistent service sector inflation and a moderation in the pace of energy price deflation.

Energy prices continued to fall but at a much slower annual pace, down 4.5% compared to a 6.2% drop in August.

Meanwhile, services such as healthcare and communications experienced more robust yearly cost increases, which counteracted sluggish or falling prices for goods and energy.

Why Are Core Pressures Reemerging?

Germany’s core inflation rate excluding food and energy rose to 2.8%, ending three months of flat readings and highlighting underlying cost pressures.

This indicates broader inflation drivers are still present regardless of progress in bringing headline rates down through volatile categories like energy.

Core inflation is particularly significant for central bankers. Persistent pressure in these segments suggests that the fight against inflation is not yet over, especially if wages or regulated service prices continue to climb, feeding into expectations and future pricing decisions across industries.

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What Does This Mean for the ECB?

The inflation uptick in both countries has reinforced expectations that the European Central Bank will maintain its current interest rate, reflecting a deliberate pause on the rate-cutting cycle.

The ECB’s deposit rate stands at 2.00% following the September meeting, with policymakers flagging persistent price risks as a reason for caution.

Eurozone headline inflation is expected to rise to 2.2% in September, according to preliminary projections.

Staff forecasts predict inflation to average 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027, maintaining pressure on the ECB to strike a balance between containing inflation and supporting a weak regional economy.

Will the Inflation Uptick Continue?

While the September surge raises concerns about the recent narrative of disinflation, most analysts expect prices to stabilize if energy markets remain stable.

However, sticky service inflation and global uncertainties could still push rates higher in the coming months if unchecked.

Financial markets and policymakers will closely monitor the upcoming data releases, particularly eurozone-wide inflation, which is due soon, for signs of persistence or reversal.

Economic resilience and ECB communications will play crucial roles in shaping whether this inflation uptick becomes a renewed trend or a temporary blip in 2025’s economic story.

Looking ahead, the resurgence of inflation in Germany and France has reignited debate over the trajectory of European monetary policy.

The acceleration is a stark reminder that the path back to target inflation is unlikely to be smooth or straightforward. All eyes will be on the ECB and broader eurozone dynamics as the year continues.