Ifo Institute predicts rising inflation for 2027

Anyone hoping that everything will be better next year, at least economically, will now be disappointed: The Ifo Institute is presenting a forecast for the inflation rate in 2027 - according to which inflation could be higher than this year.

The Ifo Institute does not see any lasting relief in inflation; on the contrary: the cost of living is likely to rise more sharply in 2027 than in the current year. The inflation rate will then be higher at 3.0 percent than in 2026 at 2.8 percent, as the Munich researchers predicted. They fear that if energy prices continue to rise for a long time as a result of the Iran war, there will be a broader rise in consumer prices. “The longer the war in the Middle East continues and energy prices remain high, the more consumer prices for food, services and goods are likely to rise in the medium term,” said Ifo researcher Tiphaine Wibault. The reason for this is that companies are allowed to pass on increased costs with a delay.

There are currently no signs of this. In August, even fewer companies planned to increase their prices. The corresponding barometer for price expectations fell to 21.2 points, from 21.6 points in July. “This indicates a slight decrease in price pressure over the next three months,” emphasized the Ifo Institute. However, crude oil prices and especially the market prices for natural gas and electricity have risen significantly again since the beginning of August.

Price expectations fell in many economic sectors in August. For energy-intensive industrial companies, the indicator fell from 21.3 to 18.7 points, and for non-energy-intensive companies from 22.7 to 19.0. In retail, companies also reduced their price expectations slightly from 31.4 to 30.0 points. For service providers, however, they rose from 19.1 to 20.9 points.

Inflation in Germany rose sharply again in August due to expensive energy. Goods and services cost 2.9 percent more than in the same month last year, as the Federal Statistical Office announced on Monday. Consumer prices last rose even more strongly at the end of 2023. In July, the inflation rate climbed to 2.8 percent, from 2.3 percent in June. The biggest price driver remained energy, which cost significantly more due to the renewed Middle East war. Special effects such as low water on the Rhine also impacted many consumers - for example in North Rhine-Westphalia.