The price pressure on people in Germany is easing. In December, the inflation rate fell to 1.8 percent, according to the Federal Statistical Office in Wiesbaden. In November the rate was 2.3 percent. Economists expect little relief in consumer prices in the new year – even if another major wave of inflation is considered unlikely.
Price pressure is primarily caused by more expensive services, including car insurance, package tours and visits to the hairdresser and restaurants.
According to preliminary data, on average in 2025, prices for goods and services rose by 2.2 percent compared to the previous year. The inflation rate was therefore at the same level as in 2024 (2.2 percent).
Inflation rate is expected to remain above two percent in 2026
Higher inflation rates reduce the purchasing power of consumers. Your financial flexibility is shrinking and income growth is being eaten up by inflation.
Economists expect the inflation rate to remain above the 2 percent mark in 2026. However, no expert expects prices to rise rapidly like in 2022 and 2023 after the Russian attack on Ukraine. According to a forecast by the Ifo Institute, the inflation rate is likely to be 2.2 percent this year and 2.3 percent in 2027.
Services drive inflation
In December, services rose noticeably by 3.5 percent. The reason for this is usually increased wages that companies pass on to customers. The increase in the minimum wage on January 1st is also likely to have an impact on prices.
Food prices in December were 0.8 percent higher than in the same month last year; the value is well below the general inflation rate. Butter, for example, has recently become cheaper. However, when doing their daily shopping, people notice that overall food prices are significantly higher than they were a few years ago.
Fueling and heating cheaper
There is also relaxation in energy prices: according to statistics, fuel, electricity and gas were 1.3 percent cheaper in December than a year before. From November to December 2025, consumer prices remained unchanged.
Core inflation, which economists pay particular attention to, excluding the volatile prices for food and energy, fell to 2.4 percent in December. It therefore remains slightly increased.
Rising wages help
The higher the inflation rate, the less people can afford with their money. The price wave that hit Germany after the Russian attack on Ukraine has ended. At that time, energy and food prices rose rapidly. This caused the inflation rate to skyrocket to 6.9 percent on average in 2022 and 5.9 percent in 2023 until it normalized in 2024.
However, inflation feels much higher: In a survey by the German Economic Institute (IW), participants estimated the inflation rate in 2024 to be 15.3 percent – around seven times higher than it actually was.
After all, rising wages and subdued inflation mean that many people have more money in their pockets again. Wages have been growing after deducting inflation for more than two years.
Great importance for the ECB
The inflation rate in Germany, the largest economy in the Eurozone, is of particular importance for the monetary policy of the European Central Bank (ECB). It is targeting an inflation rate of 2.0 percent for the euro area in the medium term. With such inflation, the ECB sees its most important task of ensuring stable prices fulfilled.
The Federal Statistical Office calculates every month how prices have developed for consumers. To do this, the statisticians note down in stores how much fruit and vegetables, shoes and furniture cost. How much is the rent for the apartment and how much does gas cost at the gas station? Thousands of individual prices of goods and services are recorded representatively according to the same pattern. Some of the prices are also collected online.