BERLIN, January 6, 2026 – Germany’s inflation slowed more than expected in December, dipping to 2.0% year-on-year, preliminary data from the Federal Statistics Office showed on Tuesday. Analysts had forecast a decline to 2.2% from November’s 2.6%.

The core inflation rate, which excludes volatile food and energy prices, also eased to 2.4% from 2.7% the previous month.

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Key Drivers of the Slowdown

• Energy base effects contributed to the lower headline inflation.
• Falling prices in leisure, clothing, and food also helped reduce overall price pressures.
• Economists note that the slowdown reflects the ongoing economic weakness in Germany, which grew just 0.2% in 2025 following two years of contraction.

Vincent Stamer, senior economist at Commerzbank, said, “Price pressure has eased significantly, reflecting the sluggish German economy.”

Carsten Brzeski, ING’s global head of macro, described the news as “good for the ECB and the German government,” as it removes one concern amid other economic challenges.

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Implications for the Eurozone and ECB

• The German data precede the eurozone inflation report, expected Wednesday, where preliminary figures suggest headline inflation fell below 2% in December.
• Inflation in the euro area has hovered around the ECB’s 2% target, mainly due to rising service prices.
• Most analysts expect the European Central Bank to keep interest rates unchanged in the coming months.

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Outlook:
While December’s figures are encouraging, economists warn that inflation is unlikely to fall further in early 2026, as service sector prices are projected to rise. Germany’s modest growth and the eurozone’s price stability will continue shaping ECB policy decisions.