Economic experts forecast a further decline in inflation in Germany in the second half of 2025. The main contributing factors are:
- Lower energy prices
- Strengthening of the euro
- Slower wage growth
- Lower external demand due to trade tensions
Thus, German inflation in January-May 2025 shows a steady downward trend, approaching the ECB’s target level. This creates preconditions for monetary policy easing and supports expectations of economic stability in the second half of the year.
Impact on monetary policy
The slowdown in inflation in Germany and other eurozone countries reinforces expectations of interest rate cuts by the ECB. In May 2025, euro area inflation stood at 2.1 per cent, which is in line with the ECB’s target.
The ECB is expected to decide to cut its key interest rate by 0.25 percentage points to 2.0% at its meeting on 4-5 June 2025. This will be the eighth rate cut since June 2024, when it stood at 4.0%.