The inflation rate eased to 1.1 percent in December compared with the same month last year, down from 1.4 percent in November, according to the figures from the national statistics office Destatis.
But for all of 2008, an inflation rate of 2.6 percent exceeded last year's level of 2.2 percent and was the highest since 1994, when it reached 2.8 percent.
"The year 2008 started out with relatively high inflation rates, which were highest in June and July at 3.3 percent" on a 12-month basis, a Destatis statement said.
The spike and a subsequent sharp slowdown were mainly the result of volatile prices for fuels and some food items, it added. Final figures are due on January 15.
Postbank analyst Fabienne Riefer said inflation for the entire eurozone, which will have 16 members when Slovakia joins on Thursday, should now fall below 2.0 percent in December for the first time since August 2007.
The European Central Bank's medium-term target is close to but below 2.0 percent. In mid 2009, eurozone inflation could also fall below 1.0 percent before rising towards the end of the year, Riefer forecast.