German inflation reaches 2.4 pct

27th April 2011, Comments 0 comments

Inflation rose to 2.4 percent in Germany this month, the highest level since September 2008, provisional data released by the national statistics office showed Wednesday.

The rise from 2.1 percent in March was in line with an average analyst forecast compiled by Dow Jones Newswires and underscored growing price pressures in the biggest European economy as it continues a strong recovery.

That could sustain concern at the European Central Bank (ECB), which has a medium-term inflation target of just below 2.0 percent.

"The underlying trend in core inflation is clearly pointing upwards now," Goldman Sachs senior European economist Dirk Schumacher said.

Capital Economics economist Ben May argued however that "the pick-up is not quite as alarming as it initially seems," because a major factor could be the timing of the Easter holiday this year.

On a monthly basis, consumer prices gained 0.2 percent in April, the Destatis office reported, which was also what analysts had expected and lower than the increase of 0.5 percent in March.

"The strongest monthly price movements were once again observed for energy prices," UniCredit economist Alexander Koch noted.

In addition to higher oil prices, the fact that Easter came later than usual this year likely affected prices in the leisure and entertainment sectors, May said, adding that they could thus see prices drop next month.

Final and detailed figures for April are due on May 11.

German inflation has exceeded 2.0 percent since January, breaching the ECB's medium-term target and explaining a decision by the central bank's policymakers to raise its main interest rate to 1.25 percent earlier in April.

Economists expect the benchmark ECB lending rate to reach 1.75 percent or even 2.0 percent by the end of the year.

"This is the flipside of the German upswing, especially since the ECB will probably not be in a position to focus its monetary policy on prospering Germany at present," Commerzbank analyst Ulrike Rondorf said.

The central bank is busy dealing with debt crises in Greece, Ireland and Portugal that have raised the cost of borrowing for those debt-laden eurozone members.

© 2011 AFP

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