Economy
Comments of KfW Research
01.07.2025 | Inflation in Eurozone in June 2025

"Inflation in the eurozone is hovering around the target value for the time being. Energy prices dampened the rise in consumer prices significantly less than in the previous month. The war in the Middle East has driven oil prices up by more than 10% on average. Even though prices have since fallen a good deal as the situation has calmed, it is an important reminder that the many geopolitical tensions are associated with upside risks for inflation. Added to this is the foreseeable increase in demand due to higher government spending on infrastructure and defense. I therefore see distinct obstacles to further interest rate cuts and expect the ECB to pause interest rates in July. However, uncertainty remains high. An escalation of the trade dispute between the EU and the US and/or a significant deterioration in economic data beyond the ECB's expectations could tip the scales in favor of a continuation of monetary easing in the autumn."
Stephanie Schoenwald
German Economy / European Economy
KfW Business Cycle Compass Germany / Eurozone
From trade shock to fiscal boost
26 May 2025
After a long barren spell, the planned fiscal boost provides the prospect of an upswing next year. In our current spring forecast, we anticipate that Germany’s gross domestic product will stagnate in 2025 but grow by 1.0% in 2026. In addition to a stabilisation of exports, significant growth impetus is likely to come from government investment in particular in 2026. In the current year, however, investments are likely to remain weak, while exports will fall again in light of the increased US tariffs. We expect euro area GDP to grow by 0.8% in 2025 and by 1.0% in 2026. The persistent services inflation contrasts with falling energy prices and disinflationary effects coming from US tariff policy. We have lowered our inflation forecasts (HICP) for 2025 to 2.0% in the euro area and 2.1% in Germany.

KfW-ifo SME Barometer
SMEs play a decisive role for the growth and prosperity of an economy. Using its unique surveys, studies and statistics, KfW Research analyses the needs of SMEs in Germany. The KfW-ifo SME Barometer indicators are based on a scale-of-enterprise evaluation of the ifo economic surveys, from which the well-known ifo business climate index is calculated, among others. Around 9,500 businesses, including around 8,000 SMES, from manufacturing, construction, wholesale, retail and services (excluding lending, insurance and state) are polled monthly regarding their economic situation.
Sentiment continues to improve on expectations
3 July 2025
Despite the simmering trade conflict between the US and the EU and other countries as well as the 12-day war that broke out between Israel and Iran in June, SME sentiment continued to brighten at the beginning of summer. This was mostly due to the steadily growing belief in a better economic future, whereas business situation assessments showed that current conditions remain difficult.

Contact
KfW Research, KfW Group, Palmengartenstrasse 5-9, 60325 Frankfurt, Germany, research@kfw.de
Share page
To share the content of this page with your network, click on one of the icons below.
Note on data protection: When you share content, your personal data is transferred to the selected network.
Data protection
Alternatively, you can also copy the short link: https://www.kfw.de/s/enkBbw3W
Copy link Link copied