Tags: German | Inflation | Rate | Steady | at | Two-Year | High

German Inflation Rate Held Steady at Two-Year High in March

Tuesday, 29 Mar 2011 10:09 AM

German annual inflation held steady at 2.1 percent in March despite falls in costs for fresh food, communications and package vacations, data from the federal statistics office showed on Tuesday.

Annual inflation stood at or above 2 percent in five of the six states that make up the national index, showing price changes stayed well above the European Central Bank's target of close to, but below 2 percent.

The figure was in line with forecasts given by economists polled by Reuters.

Markets expect the ECB to raise interest rates from a record-low 1.0 percent next month to tackle inflationary pressures.

"In general, the inflation risks are rising because the price increases are spreading," said Ulrike Rondorf from Commerzbank. "The ECB will probably react to the higher inflation risks with an interest rate increase."

Earlier, state data showed inflation in North-Rhine Westphalia (NRW) — Germany's most populous state — eased a tenth of a percentage point from 2.1 percent in February. On the month, prices rose 0.5 percent, after a 0.6 percent increase last month.

The German figures are the first indication of price trends across the euro area, where inflation jumped to 2.4 percent last month but is seen easing a tenth of a point this month.

Concerns about inflation across the euro zone led the ECB earlier this month to say it may raise interest rates in April.

Policymakers have repeated that message in recent weeks despite economic uncertainty following Japan's earthquake, tsunami and nuclear disaster and turmoil in the Middle East and North Africa.

On Monday, ECB President Jean-Claude Trichet said that the inflation rate in the euro zone was "durably" above the ECB's target rate, adding to expectations that it will hike rates next month.

Inflation figures for the German states of Brandenburg and Saxony matched those of NRW, while in Hesse prices rose 0.4 percent on the month to yield an annual inflation reading of 1.8 percent.

Germany's wealthiest states of Baden-Wuerttemberg and Bavaria both posted the group's highest inflation rate — 2.1 percent annually.

© 2017 Thomson/Reuters. All rights reserved.

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German annual inflation held steady at 2.1 percent in March despite falls in costs for fresh food, communications and package vacations, data from the federal statistics office showed on Tuesday. Annual inflation stood at or above 2 percent in five of the six states that...
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