Germany’s inflation will remain elevated for the time being as energy prices linked to the Iran situation stay high and healthcare reforms scheduled for 2027 add temporary pressure, the Bundesbank said in its monthly report released on the 21st. Changes to pharmaceutical supply rules and healthcare reforms are expected to raise inflation by nearly 0.5 percentage point in the first half of 2027. Germany’s August inflation rate was 2.9% year on year on the European Union’s harmonized HICP measure. The Bundesbank said economic growth in the July-September 2026 quarter would be marginal because of weak exports, sluggish consumption and drought, while maintaining its forecast for a recovery in the October-December quarter. Improving manufacturing sentiment, fiscal support and public works were cited as supports, although the outlook remains dependent on Middle East developments and the recovery of water levels on key shipping routes. Rising living costs and economic stagnation have become major political issues, while the European Central Bank will watch whether temporary energy and reform-related price pressures spread to wages and services.