Prime Highlights:
Germany’s inflation rate remained unchanged at 2.8% in January, matching economist expectations.
On a monthly basis, the harmonized consumer price index dropped by 0.2%.
The inflation rate has now stayed above the European Central Bank’s 2% target for four consecutive months.
Key Background:
Germany’s inflation rate remained stable at 2.8% year-on-year in January, according to preliminary data from the Federal Statistics Office (Destatis), released on January 31, 2025. This figure aligns with economist expectations. On a monthly basis, the harmonized consumer price index declined by 0.2%. This data is among the last significant economic indicators before the German federal election scheduled for February 23.
The inflation rate has now been above the European Central Bank’s (ECB) target of 2% for four consecutive months, following a brief dip below this threshold in September 2024. The development reflects a broader trend of rising inflation across the eurozone. ECB officials noted that disinflation in the region remains on track and in line with projections, with euro area inflation recorded at 2.4% in December 2024. January inflation figures for the eurozone are due next week.
Core inflation in Germany, excluding volatile food and energy prices, stood at 2.9% in January, a decrease from 3.3% in December. Services inflation also showed a slight easing, declining to 4% from 4.1% in the previous month. This softening of inflation is attributed, in part, to Germany’s struggling economy, which has exerted a disinflationary effect. Preliminary data released earlier in the week indicated that Germany’s economy contracted by 0.2% in the fourth quarter of 2024, a sharper decline than expected.
Economists predict that as the year progresses, core inflation will likely continue to decrease, further supporting expectations that the ECB will maintain its course of monetary policy easing. Economic challenges, including sluggish growth and renewed inflation concerns, are key topics in the upcoming election campaign, with the German government recently revising its GDP growth forecast for 2025 to just 0.3%.
