Chapter 1Macroeconomic environment

Germany’s economic recovery continues at a moderate pace. Economic research institutes expect GDP growth of 0.2% in 2025 (source: Consensus Economics), followed by a slight acceleration to 1.2% in 2026 (source: Consensus Economics). Despite initial signs of stabilization, the overall economic environment remains characterized by political and economic uncertainty. To secure sustainable growth, comprehensive structural reforms that strengthen competitiveness and go beyond short-term policy measures will be required. The export sector showed renewed weakness in late summer: German exports declined by 0.5% in August 2025 compared with July (calendar- and seasonally adjusted), mainly due to softer demand from the United States and China. A stronger policy focus on foreign trade as a key driver of economic growth could provide new impetus. Further free trade agreements, along with reduced bureaucracy and regulatory burdens, would help open additional opportunities and mitigate potential trade barriers. The inflation rate rose to 2.40% in September, marking its highest level this year and exceeding the European Central Bank’s target of 2.00%. Following the ECB meeting on September 11, 2025, the main refinancing rate remained unchanged at 2.15%. In light of recent price developments, economists now anticipate at most one additional rate cut before year-end. After a noticeable decline earlier in the year, consumer sentiment improved slightly in October, according to the latest Consumer Barometer from the German Retail Association (HDE). The index edged higher compared with the previous month, reflecting a modest increase in purchasing intentions, while the propensity to save remained broadly stable. Although a significant recovery in sentiment is unlikely before year-end, consumer spending could benefit somewhat from seasonal factors such as the Christmas period. Looking ahead to 2026, a cautiously optimistic outlook prevails. A gradual easing of inflationary pressures, a more stable global trade environment, and rising investment activity could help guide the German economy back onto a moderate growth trajectory.

The European Central Bank (ECB) remains in a wait-and-see position and decided at its monetary policy meeting on September 11, 2025, to keep the main refinancing rate unchanged at 2.15%. The deposit rate has stood at 2.00% since June, maintaining stability over several months. With this decision, the ECB signals that the current interest rate level is considered appropriate for the time being. Market participants currently expect at most one further rate cut of 0.15 percentage points by year-end. Financing conditions remain challenging. The 10-year EUR swap rate is currently fluctuating within a range of 2.60% to 2.73%, continuing to show significant volatility. Whether an upward rate adjustment will become necessary again in the near term will largely depend on the broader macroeconomic outlook. For the first time since December 2024, the U.S. Federal Reserve has lowered its benchmark interest rate by 25 basis points to a range of 4.00% to 4.25%. The move marks the start of a cautious monetary easing cycle, though it was widely anticipated by market participants. Despite this adjustment, economic conditions in the United States remain strained: the ongoing trade tariff policies of the U.S. government under President Trump continue to create uncertainty among businesses and are dampening investment activity across key industrial sectors.

The yield on ten-year German government bonds eased slightly after reaching a short-term high of around 2.80% in September, ending Q3 2025 at 2.70%. The fluctuations reflect an ongoing reassessment of recent economic data, the potential implications for ECB monetary policy, and the broader impact of political and economic uncertainty. For the capital markets, this suggests a degree of stabilization within a defined yield corridor, providing at least short-term planning reliability for investors. However, given the recent uptick in Germany’s inflation rate to 2.40%, it remains to be seen how this development will influence the ECB’s future interest rate decisions.