Preliminary German CPI accelerates to 3.3% in September, topping forecasts

• Previous: +2.9%
• HICP: +3.3%, against a +3.2% year-on-year forecast
• Prior reading: +2.9%
• Core CPI y/y: +2.4%, matching the prior +2.4%

Preliminary figures from Destatis, Germany's Federal Statistical Office, put September inflation at 3.3% year on year, up from 2.9% in August. On a monthly basis, consumer prices gained 0.6%, after a 0.2% increase in August. The data thus point to a fresh pickup in headline inflation.

Energy remained the key driver of the extra price pressure. Year-on-year energy costs climbed 14.9%, a sharp acceleration from 10.5% in August and 8.3% in July.

In contrast, core inflation, which strips out food and energy, held at 2.4%, implying that the September pickup in headline prices was driven largely by energy, not by a comparable rise in underlying pressures. Destatis' earlier release likewise identified energy as the main factor behind August's inflation gain.

For the ECB, the steady 2.4% core reading points to no broadening in underlying price pressures. That could give policymakers enough reason to hold off in October and wait for additional data before deciding whether to raise again in December. ECB President Lagarde has recently said the current inflation rise is mainly tied to energy and that the central bank has yet to see material second-round effects in wages. With the CPI report having only a limited effect on rate expectations, the market response was fairly subdued.

For context, the Consumer Price Index (CPI) measures changes over time in what German households pay for a basket of goods and services. Year-on-year, the gauge matches prices to the same month of the prior year; month-on-month, it compares them with the month before. Traders watch the CPI because inflation shapes expectations for ECB interest-rate decisions.