German Inflation: Will New Data Force ECB to Rethink Rate Pause?

By: Marcelo Colombo Published On: 31/07/2025

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Germany's inflation figures are under close scrutiny as traders await the latest Consumer Price Index (CPI) readings from several German states. The data, expected later today, will provide crucial insights into the country's economic health and influence the European Central Bank's (ECB) future monetary policy decisions.

Key Inflation Figures to Watch

Analysts anticipate a slight easing in headline annual inflation, projected to reach 1.9% in July. However, the core inflation rate remains a focal point. The ECB policymakers will be paying close attention to the core inflation rate as they gear up for their September meeting. A persistently high core inflation could prompt a reassessment of the current monetary policy stance.

ECB's Rate Pause Likely to Continue

Currently, financial markets widely expect the ECB to maintain its pause on interest rate hikes. Odds indicate a 93% probability of no change to rates at the upcoming September meeting. Today's inflation data will play a significant role in either reinforcing or challenging these expectations.

Looking ahead, the German government's €500 billion spending plans add another layer of complexity. While the spending is unlikely to immediately fuel inflation, it could potentially stimulate productivity and reshape the country's economic landscape in the long term.