FX.co ★ Germany Inflation Slips Below ECB Target

Germany experienced a decline in its annual inflation rate, falling to 1.8% in December 2025 from 2.3% in November, which was also lower than the market's anticipation of 2.0%, based on preliminary figures. This decline brought the inflation rate below the European Central Bank's target midpoint of 2% for the first time since September 2024, representing the second-lowest rate observed since early 2021. Inflation concerning goods decreased significantly to 0.4% from 1.1% noted in November. This drop was driven by a slower rise in food prices, which were up by only 0.8% compared to 1.2%, and a more pronounced decline in energy prices, which fell by 1.3% as opposed to the previous 0.1% decrease. Conversely, inflation in the services sector remained persistently high and steady at 3.5%. The core inflation rate, which excludes the fluctuating prices of food and energy, decreased to 2.4%, its lowest since June 2021. Similarly, the EU-harmonized Consumer Price Index (CPI) reduced to 2.0% in December, marking the lowest point since July and falling short of the forecasted 2.2%. Throughout the entire year of 2025, Germany's national inflation maintained an average of 2.2%, while the harmonized inflation rate was slightly higher at an average of 2.3%.