Energy prices rose by 15%, but core inflation remained unchanged.

Germany’s Federal Statistical Office released the preliminary September consumer price index (CPI) on September 30, showing a year-on-year increase of 3.3%—up from 2.9% in August. Nearly the entire 0.4-percentage-point rise came from energy: energy prices surged 14.9% year-on-year, while the core inflation rate—excluding food and energy—stood at 2.4%, unchanged from previous months. On a month-on-month basis, prices rose 0.6% in September after a 0.2% increase in August. Three steps in three months The acceleration in energy prices has been continuous: +8.3% year-on-year in July, +10.5% in August, and +14.9% in September—a jump of 6.6 percentage points within two months. The final official figures will be published on October 13; revisions between preliminary and final data typically stay within ±0.1 percentage point. Core inflation remained static. That 2.4% figure implies that, as of September, the surge in energy costs had not yet broadly fed through into the pricing of other goods and services. The ECB has already hiked twice Germany’s data is not isolated. The ECB’s deposit facility rate stood at 2.00% from June 11, 2025, for a full year. It was raised to 2.25% on June 17, 2026, and again to 2.50% on September 16, 2026—two hikes of 25 basis points each, bringing the rate back precisely to its level in March 2025. The September 10 decision was made in Berlin, hosted by Bundesbank President Joachim Nagel. ECB President Christine Lagarde cited just one reason at the press conference: “Ongoing Middle East conflict continues generating inflationary pressures, and inflation will remain significantly above target for an extended period.” The Governing Council isn’t so relaxed Reading Germany’s September data as “energy-driven only, core stable, so we can wait” is a reasonable interpretation—but the ECB’s own forecasts do not support it. In the staff projections released in September, baseline headline inflation stands at 3.0% for 2026, 2.5% for 2027, and 2.1% for 2028; the underlying measure—excluding energy and food—is projected at 2.5% for 2026, 2.6% for 2027, and 2.3% for 2028. The trajectories differ markedly: headline inflation declines steadily over three years, while underlying inflation rises—from 2.5% to 2.6% in 2027—before falling back to 2.3% in 2028, still above the 2026 starting point. Compared with the June forecast, the 2026 baseline was unchanged, but both 2027 and 2028 were revised upward. A forecast treating the energy shock as a one-off disturbance would not produce this shape; only if forecasters expect cost pressures to continue filtering downstream would underlying inflation be projected to rise in the second year. The Governing Council does not anticipate energy prices retreating on their own; rather, it expects this round of energy-driven cost increases to seep into wages and service prices next year. Germany’s motionless 2.4% in September, under this forecast, simply reflects timing—not absence—of pass-through. Baseline GDP growth projections were also revised upward: 0.9% for 2026, 1.4% for 2027, and 1.5% for 2028. Lagarde attributed this to “stronger-than-expected resilience of the euro area economy.”

IC Markets: ECB interest-rate decision approaching amid French bond-market turmoil and policy博弈 (strategic maneuvering)

As early as its September monetary policy meeting, the European Central Bank (ECB) delivered a hawkish hike despite bond-market concerns—and markets now widely expect it to hold rates steady this time. The central question is whether renewed volatility in French and other European government bonds will nudge policymakers toward a more dovish tone. Mainstream analysis holds that conditions for a policy pivot have not yet materialized. Should bond-market turbulence persist and intensify, the ECB’s first line of defense—before activating any bond-buying tools—would likely be to soften its forward guidance on further tightening. Analysts have constructed four scenario-based forecasts around this meeting. Market reactions will hinge not only on the post-meeting statement and President Lagarde’s press conference, but also on the regular media briefing scheduled for Thursday afternoon. The September signal was unambiguous: further tightening remains possible—and a rate hike in October was still on the table. Yet markets have assigned virtually no probability to such a move this time; an unexpected hike would be extremely unlikely. Inflation has stabilized, and French bond-market stress has already prompted downward revisions to rate-hike expectations. Lagarde’s recent rhetoric has also softened somewhat in its hawkishness. This meeting will not feature updated economic projections; instead, the focus centers on language guiding expectations for December. The baseline scenario is a neutral, balanced statement preserving the option of a December hike; should the ECB explicitly state that a year-end hike is “highly likely,” even if markets have already priced in a 20-basis-point hike, that would still constitute a modestly hawkish surprise. Linkages between European interest rates and oil prices have loosened; global macro factors remain the dominant pricing driver. Risk sentiment is currently weak—not only due to French bond-market strains, but also because concerns about the artificial intelligence sector have resurfaced. Investors will listen closely to Lagarde’s remarks, but this meeting is unlikely to trigger broad market repricing. If the ECB firmly anchors expectations for a December hike, it may generate a modestly hawkish reaction—though most of the expected tightening has already been priced in, limiting potential volatility. Forward guidance must be interpreted against a backdrop of heightened uncertainty about the outlook.

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