Germany’s annual inflation rate fell to 1.8% in December 2025, down from 2.3% in November and below market expectations of 2.0%, according to preliminary data.
The reading dropped below the European Central Bank’s 2% target midpoint for the first time since September 2024, marking the second-lowest inflation rate since early 2021.
The decline was driven primarily by a sharp slowdown in goods inflation, which eased to 0.4% from 1.1% in November.
This reflected softer food price growth (0.8% vs. 1.2%) and a deeper contraction in energy prices (-1.3% vs. -0.1%).
In contrast, services inflation remained stubbornly elevated and unchanged at 3.5%.
Core inflation, which excludes volatile food and energy prices, fell to 2.4%, its lowest level since June 2021.
For the full year 2025, inflation averaged 2.3%, underscoring a gradual but uneven easing of underlying price pressures.