Consumer prices in Germany rose by 2.2% in 2025, unchanged from 2024, official estimates showed on Tuesday, as pressure on household budgets continued to ease after several years of elevated inflation.
In December, the inflation rate dropped to 1.8% year-on-year, compared to 2.3% in November, according to preliminary data from the Federal Statistical Office.
Economists expect inflation to remain above the 2% mark in 2026, after Europe’s largest economy struggled to recover from the surge in prices triggered by the coronavirus pandemic and Russia’s invasion of Ukraine in February 2022.
With the cost of energy soaring, Germany saw inflation reach 6.9% in 2022 and remain at 5.9% in 2023, the highest rates since reunification in 1990.
In 2024, the inflation rate was back at 2.2% year-on-year.
The ifo Institute, a leading economic think tank based in Munich, projects inflation to remain at 2.2% in 2026, before climbing to 2.3% in 2027.
Higher inflation rates reduce the purchasing power of consumers, who are able to afford less for every euro.
The European Central Bank, in charge of monetary policy in the 21-member eurozone, is aiming for medium-term inflation of 2% to keep prices stable.
Food price inflation slows
Higher costs for insurance, restaurants and other services were among the main drivers behind inflation in 2025, with prices for services up by 3.5% in December, mainly due to rising wages, the costs of which many companies pass on to consumers.
Real wages, which have been adjusted for inflation, have been rising in Germany for over two years.
Prices for food were up by 0.8% year-on-year in December, far below the average inflation rate.
Regardless, a majority of German says they noted the most severe price increases when buying food, according to a survey released on Tuesday.
Some 68% of the 1,000 adults questioned by pollsters Forsa in November said they felt food prices had seen the steepest rise, while 16% said they thought the costs for energy had risen the most.
While food price inflation has slowed, many items are considerably more expensive than they used to be before the coronavirus pandemic.
Experts attest healthy inflation rate
In a sign of further relief, consumer prices for energy, including fuel, electricity and gas, were down 1.3% in December compared to the same month in the previous year, while remaining unchanged month-on-month.
Core inflation, which excludes the volatile prices for food and energy, dropped to 2.4% in December.
ING chief economist Carsten Brzeski said he believes inflation will remain below 2% in the first months of 2026 due to a strong euro and cheaper imports, as goods are flooding Europe due to higher US tariffs.
However, he said a reduction of VAT on restaurant food from 19% to 7% that took effect on January 1 is unlikely to be passed on to consumers.
Chief economist at Germany’s Dekabank Ulrich Kater said the development of consumer prices in the country was completely within the norm.
“The country has many economic problems, but inflation is not one of them,” he said.
The German economy contracted in 2023 and 2024, while growth was forecast to be minimal last year and no meaningful recovery is expected in 2026.