German Inflation Holds Steady at 2.3% in November, ECB Decisions Under Scrutiny

German Inflation Rate Remains Stable in November

Germany's annual inflation rate held steady at 2.3% in November 2025, matching the figure from October and coming in below market forecasts of 2.4%, according to preliminary estimates released by the Federal Statistical Office (Destatis). This stability in the headline rate provides a mixed picture for economic observers and policymakers alike. Consumer prices also saw a month-on-month decline of 0.2% in November, marking the first decrease since January.

Key Inflation Components Show Varied Trends

While the overall inflation rate remained unchanged, underlying components presented varied movements. Core inflation, which excludes the more volatile categories of food and energy, eased slightly to 2.7% in November, down from 2.8% in October. This indicates a modest cooling of underlying price pressures. However, services inflation remained a point of concern, holding firm at an elevated 3.5%. This figure is particularly significant as it is closely monitored by the European Central Bank (ECB) due to its strong correlation with wage growth. Energy prices contributed to the overall stability, decreasing at a slower pace of -0.1% year-on-year in November, compared to a -0.9% decline in October. Food prices also saw a moderated increase of 1.2%, down from 1.3% in the previous month.

Harmonised Index and ECB's Stance

The Harmonised Index of Consumer Prices (HICP), the metric favored by the ECB for eurozone-wide comparisons, showed a slight acceleration in Germany, rising to 2.6% in November from 2.3% in October. This upward movement in the harmonised rate, coupled with persistent services inflation, is likely to factor into the ECB's upcoming monetary policy decisions. Economists have noted that monetary policymakers are 'unlikely to be pleased' with the sustained 3.5% inflation in service prices, as highlighted by Deutsche Bank economist Sebastian Becker. Carsten Brzeski, an economist at ING, suggested that while the data might not significantly impact the ECB's December meeting, it 'strengthens the point of those at the ECB arguing against additional rate cuts.'

Implications for European Central Bank Policy

The European Central Bank has maintained its key interest rates unchanged at its past three meetings, with the deposit facility rate at 2.00%, the main refinancing operations rate at 2.15%, and the marginal lending facility rate at 2.40%. The ECB's primary objective is to achieve and maintain price stability, targeting an inflation rate of 2% over the medium term. With Germany's annual inflation remaining above this target and services inflation proving sticky, the central bank is widely anticipated to keep its key rate steady at its next meeting on December 18, 2025. The ECB continues to adopt a data-dependent and meeting-by-meeting approach to its monetary policy, carefully assessing the inflation outlook and associated risks.