Germany’s prices climbed a bit faster last month, official numbers showed Friday, just as the European Central Bank announced another interest rate reduction.
The country’s inflation rate hit 2.1% in January, up from 2% the month before, Germany’s statistics office reported. Experts had thought the rate would stay flat.
The timing is notable. The ECB cut its key rate by a quarter percentage point to 2.75% on Thursday, the fifth straight reduction since June. Bank officials called their policy still “restrictive” and hinted more cuts could come, even with inflation creeping up in Germany, Europe’s biggest economy.
Price increases across the euro area have been leveling off at around 2%, the ECB’s target. Shoppers expect prices to keep rising at about the same pace over the next year, according to survey data the central bank released Friday morning.
What’s catching attention is how well the economy performed late last year.
Germany expanded 0.3% in the final three months of 2025, matching the broader eurozone pace. Spain led the pack with 0.6% growth, while France posted 0.5% expansion. Italy managed 0.1% growth. All four major economies beat what forecasters expected.
Joachim Nagel, who leads Germany’s Bundesbank, said recently there’s no need to adjust rates anytime soon. He added that making long-term predictions is tricky.
Interest rates expected to hold steady through 2027
Most economists agree. They think borrowing costs will stay where they are through at least the end of 2027. Some had suggested rates might go up in 2026, but those voices have mostly gone quiet.
All this is happening while businesses and governments deal with ongoing concerns about trade disputes and the war in Ukraine. Despite those worries, the region’s economy has held up better than many feared.
The ECB’s monetary policy stance will give officials a chance to weigh the inflation uptick against the economy’s recent strength at upcoming meetings.
