German inflation stuck at 2.1 percent in March

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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 and reinforced speculation of a European Central Bank (ECB) interest rate hike next week.

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.

That helped push up transport prices for example in the southwestern state of Baden-Wuerttemberg, which gained 4.5 percent on the year and 2.2 percent from February.

The latest figure for Germany exceeded the ECB's medium term target of just under 2.0 percent and was published as the central bank appears set for its first interest rate hike in almost two years.

On a monthly basis, 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.

"The sideways trend in inflation since the beginning of the year is definitely no sign of abating inflationary pressures and will not convince the ECB to back away again from its tightening bias," UniCredit economist Alexander Koch commented.

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

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