Deutsche Bank fears 3.4 percent inflation in 2027 as tank rebate ends

Inflation in Deutschland fell to 2.8 Prozent in October from a three-year high of 3.3 Prozent in September, the Statistische Bundesamt reported on Friday, beating economists' average forecast of 3.0 Prozent. But Deutsche Bank economists say the relief will not last: they forecast an average inflation rate of 3.4 Prozent next year, putting the EZB's two-percent target far out of reach.

The decline is largely the work of the Tankrabatt. In response to the sharp rise in oil prices after the Irankrieg, the Bundesregierung cut Energiesteuer by 14 Cent per litre, with a further three-Cent reduction in Mehrwertsteuer. The relief for motorists is limited to October through December.

Deutsche-Bank-Ökonom Sebastian Becker said that already at the start of 2027, the expiry of the Tankrabatt alone would push inflation back up. Claus Niegsch, Branchenanalyst at DZ Bank, said the fall in inflation due to the Neuauflage of the Tankrabatt is no reason for Entwarnung, noting that there was a similar development with the Erst- und Zweitauflage in June 2022 and in May of this year.

The gap between the headline figure and the underlying trend matters for monetary policy. If Deutsche Bank's forecast holds, price growth would sit well above the EZB's two-percent goal for a second year, complicating the case for further easing in Frankfurt.