Iran War Drives German Inflation to 2.8%

This increase from February's 2.0% rate exceeded the European Central Bank's (ECB) 2% target. Economists polled by The Wall Street Journal had anticipated the 2.8% rate.

Energy prices recorded their first increase since December 2023, reversing February's 1.9% decline. The ECB maintained its key rate earlier this month, but policymakers now state the Middle East conflict will elevate inflation and slow economic growth.

Core inflation, which excludes energy and food, remained unchanged at 2.5%, the same rate as last month, while food inflation decreased to 0.9% in March from 1.1% in February. However, the closely watched monthly business survey from the Ifo Institute indicates firms expect higher selling prices.

Commerzbank economist Ralph Solveen warns that the longer the war continues and causes energy and other raw materials to become more expensive or scarce, the more likely it is that underlying inflation will also pick up.