Persistent inflation remains adequate at a rate of 2.0%
In a recent report, the Council of Economic Experts predicts that inflation in Germany will stay stable at around 2.0 percent in 2025, maintaining price stability consistent with the European Central Bank's (ECB) goals. This rate reflects a significant decline from the elevated inflation levels seen in 2022 (6.9%) and 2023 (5.9%), which were driven by sharp increases in energy and food prices following Russia’s invasion of Ukraine.
The current inflation rate in mid-2025 remains close to this 2% level, with monthly price increases of around 0.3% reported and stability expected over the coming months by both the Bundesbank and the Council of Economic Experts. This relatively moderate inflation is seen as supportive of steady economic growth, since too low inflation could lead to postponed investments by consumers and businesses.
Looking ahead to 2026, the outlook foresees a slight easing, with one forecast expecting headline inflation to drop to about 1.9% and core inflation to fall to 2.0%. However, risks remain on both sides: geopolitical tensions, trade frictions, and government spending could push inflation up, while weak domestic demand, currency strength, and shifts in global trade could lower inflation pressures.
Controversies between advocates and opponents of a more accommodative monetary policy are expected in the fall. The European Central Bank did not make any further monetary easing at its latest meeting last week.
Despite the ongoing uncertainties, the report highlights a few factors contributing to the slow easing of inflation. Higher wages are contributing to the slow easing of inflation in services. Conversely, global corporations might try to enforce higher prices in Europe to offset their losses in the USA.
The report also points out that food prices increased by 2.2% year-on-year, while energy prices were 3.4% cheaper than in July 2024. Carsten Breszki, ING economist, expects less inflationary pressure in the coming months due to the tense labor market situation, while Jörg Krämer, Commerzbank chief economist, considers the persistently high core inflation rate a "blemish" due to the inflation risk as the economy recovers.
Ulrich Kater, Deka chief economist, believes the high inflation wave has run its course. The refinancing rate remains unchanged at 2.0 percent after seven consecutive rate cuts. The ECB sees its price stability target met with an inflation rate of 2.0 percent, and the Bundesbank expects the German inflation rate to fluctuate around the 2.0 percent mark in the coming months.
In conclusion, the Council of Economic Experts anticipates a 2.0 percent value for the 2025 annual average. The economic environment remains sensitive to external risks, and controversies between advocates and opponents of a more accommodative monetary policy are expected in the fall. However, the stable inflation outlook for 2025 is a positive sign for Germany's economic growth and stability.
[1] Source: Council of Economic Experts Report, 2025 Inflation Outlook [2] Source: European Central Bank Forecast, 2026 Inflation Outlook [3] Source: Bundesbank Report, 2025 Inflation Outlook
The finance industry closely monitors the inflation rate in Germany, as it has a significant impact on business decisions. The Council of Economic Experts, Bundesbank, and other financial institutions forecast a stable inflation rate of around 2.0 percent for 2025, providing a supportive environment for economic growth. This moderate inflation is consistent with the European Central Bank's goals and is expected to continue over the coming months.
