Germany’s wholesale inflation surged on energy and metals costs, complicating ECB policy outlook, with markets pricing fewer rate hikes despite persistent price pressures.
The secondary effects of the U.S.-Iran war and the subsequent strain on the energy supply chain have become increasingly evident across the rest of the world. Germany reported on Tuesday a spike in wholesale prices in March, prodded by higher mineral oil and non-ferrous product prices.
The Euro forex futures (6E) fell in early reaction but have recovered since then and traded with a marginal gain.
Crunching the Numbers: Wholesale prices jumped 4.1% year over year (YoY) in March, faster than the 1.2% increases in each of the previous three months, according to a report released by Destatis. The annual rate of increase in March was the fastest since February 2023.
The statistical office attributed the spike to the Middle East conflict, which pushed up prices, especially that of energy products and raw materials.
Destatis noted that mineral oil product prices jumped 17.8%, on average, and non-ferrous ores, non-ferrous metals and non-ferrous semi-finished metal product prices climbed 48.4%. Other products that saw notable price increases were sugar, confectionery and bakery products (+6.1%) and tobacco (+5.9%).
German Wholesale Mineral Oil Prices
Source: Destatis
Germany is one of Europe’s largest net energy importers, and 6% of oil imports to the country comes from the Middle East, according to ING.
On the other hand, wholesale flour and cereal product prices fell 5.8% and the prices of wholesale grain, unmanufactured tobacco, seeds and animal feeds declined 3.4%.
On a month-over-month basis, wholesale prices climbed 2.7% compared to March’s 0.6% rise and the 0.4% consensus estimate.
Read-Across for ECB Rate Move: Germany is Europe’s largest economy, and therefore the economy’s trajectory could impact European Central Bank’s policy decisions. The German economy, which expanded 0.3% sequentially in the 2025 fourth quarter, has seen a loss of momentum this year.
February industrial production data released last week showed a 0.3% MoM dip in output following unchanged production in January, dragged by weaker pharmaceutical and electronic industry output. Cold winter weather also weighed down on construction output. ING expects the German economy to contract for yet another quarter.
Source: Destatis
Delving into rate outlook, ING U.K. & European Rates Strategist Michiel Tukker said, “It’s very difficult to see an ECB hike three times. “But as a matter of fact it might be more reflective of say two rate hikes if you account for these liquidity effects,” he said. The ECB’s Governing Council has held all three key rates unchanged since June 2025.