The consumer prices in Germany are expected to increase by 2.1% in May 2025 compared to the same month last year, representing a moderate inflation rate. This rate has hardly changed compared to the previous months of April (also 2.1%) and March (2.2%) and is significantly below the previously mentioned figure of 3.5%.
Current Inflation Development
The inflation rate in May 2025 was about +2.1% compared to the same month last year. In April, inflation also stood at around 2.1%, after reaching 2.2% in March. Interestingly, the core inflation (excluding food and energy) is slightly higher at about +2.8%. Notably, energy prices have decreased by -4.6% compared to the previous year, which mitigates the overall inflation. In contrast, food continues to be a price driver with an increase of about +2.8%.
Background of the Development
The high inflation in the years 2022 and early 2023 was primarily caused by sharply rising prices for energy and food. Since the second half of 2023, the situation has noticeably eased; in particular, energy prices have fallen. This has led to a significant cooling of overall inflation to currently more moderate values of just above two percent.
Consequences for Monetary Policy and Consumer Behavior
The European Central Bank (ECB) bases its monetary policy decisions on these inflation figures. A moderate inflation of around or slightly above two percent corresponds to its target value. With a stable or slightly decreasing inflation rate, the ECB could cautiously shape its interest rate policy to ensure price stability. For households, lower inflation means less loss of purchasing power than with high rates; however, saving behavior remains cautious due to volatile food prices.
In summary, it should be noted: The current inflation in Germany is around 2.1%, not the initially stated 3.5%. This development significantly influences the monetary policy decisions of the ECB and the consumption and saving behavior of consumers.