Germany’s Inflation Rises to 2.1% as ECB Cuts Rates Amid Economic Resilience

Germany’s inflation rate edged up to 2.1% in January, slightly exceeding expectations of a flat reading at 2%. The uptick coincides with the European Central Bank’s fifth consecutive rate cut, reducing its key rate to 2.75%. ECB officials maintain that policy remains restrictive, leaving room for further easing despite inflationary pressures in the eurozone’s largest economy.

Eurozone inflation appears to be stabilizing around the ECB’s 2% target, with consumer expectations aligning with this trend. The region’s economic performance in late 2025 outperformed forecasts, with Germany growing 0.3%—matching the eurozone average—while Spain and France expanded at 0.6% and 0.5%, respectively.

Bundesbank President Joachim Nagel downplayed the need for near-term rate adjustments, emphasizing the challenges of long-term economic forecasting. Market consensus now suggests borrowing costs will remain steady through 2027, revising earlier expectations of potential 2026 hikes.