German inflation stays at 2.1 percent in March

29th March 2011, Comments 0 comments

German inflation stood at 2.1 percent in March, unchanged from the previous month, provisional data released Tuesday by the national statistics office showed.

The estimate by the Destatis office followed four consecutive inflation increases in Europe's biggest economy.

Analysts polled by Dow Jones Newswires had forecast a slight decline to 2.0 percent for the annual inflation rate.

Inflation has been fueled by the unrest in the Middle East and North Africa which, along with stronger global demand for basic commodities in general, has pushed up the cost of energy and food.

"As in previous months, the price increases have been driven by energy products, especially heating fuel and motor fuels," a Destatis statement said.

The latest figure for Germany was still higher than the European Central Bank's medium term target of just under 2.0 percent, and was published as the ECB appears set for its first interest rate hike in almost two years.

On a monthly basis meanwhile, German consumer prices rose by 0.5 percent in March, the same level as in February and slightly higher than a forecast of 0.4 percent.

"Business costs have hugely risen and the strong upswing of the Germany economy increases the risk of these costs being passed onto consumers," Commerzbank analyst Ulrike Rondorf noted.

"While the ECB may take a little comfort from these figures, note that both energy and food are likely to push the headline rate higher over the next couple of months," added European economist Ben May at Capital Economics.

Early this month, the ECB caught financial markets by surprise when its president Jean-Claude Trichet hinted that it might hike its main interest rate in April from the current record low of 1.0 percent.

Markets now expect the rate to rise first to 1.25 percent, and forecast further increases later in the year.

© 2011 AFP

0 Comments To This Article