German inflation rises as ECB cuts rates for fifth straight time

Germanys 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, Europes biggest economy.

Price increases across the euro area have been leveling off at around 2%, the ECBs 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.

Whats 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.

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 regions 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.

Don‘t just read crypto news. Understand it. Subscribe to our newsletter. It’s free.