Germany's consumer price inflation eased to 2.2% in March 2025, its lowest level since November 2024, in line with market expectations, according to a preliminary estimate.
German inflation rate slows to four-month low
The slowdown was primarily driven by a significant deceleration in services inflation, which eased to 3.4% from 3.8% in February, reflecting weaker price pressures in areas such as rents, transportation, and hospitality. Additionally, energy costs continued to decline, falling by 2.8% year-on-year, following a 1.6% drop in February, as lower global oil and gas prices helped ease cost burdens for households and businesses.
However, food inflation saw a slight uptick, rising to 2.9% from 2.4% in the prior month, signaling persistent cost pressures in essential consumer goods. This increase was largely driven by higher prices for fresh produce and dairy products, as supply chain disruptions and elevated input costs affected food markets. Meanwhile, core inflation, which strips out the volatile effects of food and energy, also slowed to 2.5%, the lowest rate since June 2021. This decline suggests a broader easing of underlying price pressures, which could influence the European Central Bank’s future monetary policy decisions.
Monthly figure
On a monthly basis, consumer prices rose by 0.3% in March, moderating from a 0.4% increase in February. While inflation remains above the European Central Bank's 2% target, the steady downward trend may provide policymakers with room to consider rate adjustments later in the year. Investors and economists will be closely monitoring upcoming economic indicators, including wage growth and producer price trends, to assess whether inflationary pressures will continue to subside in the coming months.
