Germany’s December 2025 CPI Rises to 2.10%: Inflation Rebounds, Policy Dilemmas Deepen
Germany’s Consumer Price Index (CPI) for December 2025, released January 30, 2026, climbed to 2.10% year-over-year, exceeding both November’s 1.80% and market expectations of 2.00%[1]. This marks a notable acceleration after several months of subdued inflation, raising fresh questions about the trajectory of price pressures and the European Central Bank’s (ECB) next moves.
Table of Contents
Big-Picture Snapshot
Drivers this month
December’s 2.10% CPI print for Germany (DE) reverses the prior month’s cooling trend, with energy and food prices providing the largest upward push. The Sigmanomics database shows:
- December 2025: 2.10% YoY
- November 2025: 1.80% YoY
- October 2025: -0.20% YoY (notably negative)
- 12-month average (Jan–Dec 2025): 1.30% YoY
Key contributors in December included:
- Energy: 0.70 percentage points (pp)
- Food: 0.50 pp
- Shelter: 0.30 pp
- Core goods: 0.20 pp
Policy pulse
With inflation now above the ECB’s 2% target, the December reading complicates the central bank’s dovish pivot. The ECB had signaled possible rate cuts in H2 2026, but persistent price pressures may delay easing. The Bundesbank’s hawkish members are likely to push for caution, especially as wage settlements remain elevated.
Market lens
Immediate reaction: EUR/USD spiked 0.30% and 2-year Bund yields rose 7 bps in the first hour after the print. The upside surprise triggered a swift repricing in money markets, with traders paring back bets on near-term ECB cuts. German equities lagged broader European indices, reflecting concerns over tighter financial conditions.
Foundational Indicators
Macro context
Germany’s inflation trajectory has been volatile in 2025. After peaking at 2.30% in November, CPI briefly turned negative in October (-0.20%), before rebounding to 1.80% in November and now 2.10% in December. The 12-month average of 1.30% underscores the recent acceleration. Core inflation (ex-energy and food) is estimated at 1.70% for December, up from 1.40% in November.
Fiscal policy & government budget
Fiscal policy remains moderately expansionary. The German government’s 2026 draft budget includes targeted energy subsidies and increased infrastructure spending, which may add to demand-side pressures. However, fiscal rules are expected to tighten in H2 2026, potentially dampening inflationary momentum.
External shocks & geopolitical risks
Energy price volatility, driven by ongoing tensions in Eastern Europe and supply disruptions, remains a key risk. The euro area’s exposure to global commodity markets means that external shocks could quickly feed into German inflation. Additionally, shipping bottlenecks in the Red Sea have pushed up import costs for manufacturers.
Chart Dynamics
Drivers this month
- Energy: 0.70 pp (oil and gas rebound)
- Food: 0.50 pp (supply chain disruptions)
- Shelter: 0.30 pp (rising rents)
- Core goods: 0.20 pp (imported inflation)
Policy pulse
The ECB’s inflation target is 2%. December’s 2.10% reading puts Germany above target for the first time in four months, raising the bar for imminent rate cuts. Market-implied ECB rate expectations shifted upward by 12 bps post-release.
Market lens
Immediate reaction: EUR/USD spiked 0.30% and 2-year Bund yields rose 7 bps. The DAX retreated 0.50% intraday, while inflation breakevens widened by 9 bps, reflecting renewed inflation concerns.
Forward Outlook
Scenario analysis
- Bullish (25%): Inflation moderates to 1.50% by March 2026 as energy prices stabilize and supply chains normalize. ECB resumes dovish guidance, supporting risk assets.
- Base case (60%): CPI remains near 2% through Q1 2026, with sticky core inflation and modest wage growth. ECB delays rate cuts to late Q2 2026.
- Bearish (15%): Inflation accelerates above 2.50% by April 2026 due to renewed energy shocks or fiscal slippage. ECB forced to signal further tightening, risking growth.
Risks & catalysts
Upside risks include further energy price spikes, wage settlements, and fiscal expansion. Downside risks stem from global growth slowdown, rapid disinflation in goods, or a sharp euro appreciation. External shocks—especially in energy—remain the key swing factor.
Market lens
Bund yields and EUR/USD are likely to remain sensitive to inflation surprises. Equity and credit markets may face renewed volatility if inflation proves stickier than expected.
Closing Thoughts
Summary
Germany’s December 2025 CPI rebound to 2.10% signals that inflation risks are not yet vanquished. The reading complicates the ECB’s policy outlook, with markets now less certain about the timing and scale of rate cuts. Investors should watch for further data on core inflation, wage trends, and energy prices as key determinants of the 2026 macro path.
Key Markets Likely to React to CPI
Germany’s CPI readings have a direct impact on EUR currency pairs, Bund yields, and German equities. The following symbols are closely watched by traders for their sensitivity to inflation surprises and ECB policy shifts. Each reflects a different channel—currency, rates, equity, and crypto risk sentiment—through which German inflation data can move markets.
- DAX – Germany’s blue-chip index, highly sensitive to domestic inflation and ECB policy.
- EURUSD – The euro/dollar pair, reacts sharply to German and eurozone inflation surprises.
- EURJPY – Tracks euro strength and risk sentiment, often moves on ECB rate expectations.
- BTCUSD – Bitcoin, sometimes viewed as an inflation hedge, can react to CPI shocks.
- BAS.DE – BASF, a German industrial bellwether, sensitive to energy costs and inflation trends.
| Year | CPI YoY (%) | DAX YoY (%) |
|---|---|---|
| 2020 | 0.50 | 3.50 |
| 2021 | 3.10 | 15.80 |
| 2022 | 7.90 | -12.30 |
| 2023 | 6.10 | 16.00 |
| 2024 | 2.80 | 7.20 |
| 2025 | 1.30 | 4.50 |
Historically, sharp CPI spikes (2022) have coincided with DAX drawdowns, while moderate inflation (2021, 2023) has supported equity gains. The 2025 rebound in CPI bears watching for potential equity volatility.
FAQ
Q: What does Germany’s December 2025 CPI reading mean for investors?
A: The 2.10% YoY print signals persistent inflation, likely delaying ECB rate cuts and increasing volatility in EUR and Bund yields.
Q: How does this CPI release compare to recent months?
A: December’s 2.10% is up from November’s 1.80% and reverses October’s -0.20% dip, marking the highest reading since June 2025.
Q: Which markets are most sensitive to Germany’s CPI?
A: EUR/USD, DAX, Bund yields, and German industrial stocks like BAS.DE typically react strongly to inflation surprises.
Bottom line: Germany’s December CPI rebound to 2.10% reignites inflation risks and clouds the ECB’s policy outlook. Stay alert for further data and market swings.
Updated 1/30/26
- Source: Sigmanomics database, German Federal Statistical Office, ECB, Bloomberg[1]
December’s 2.10% CPI reading is 0.30 percentage points higher than November’s 1.80% and well above the 12-month average of 1.30%. This marks the first time since August 2025 that inflation has breached the ECB’s 2% target. The chart below illustrates the sharp rebound from October’s -0.20% trough, with a clear upward inflection in the last two months.
Compared to the previous six months, December’s print is the highest since June 2025 (2.20%), signaling a reversal of the late-summer disinflation trend. The YoY rate is now 0.80 pp above the September 2025 reading (1.30%), and 1.10 pp higher than the 2025 average.