German inflation puts ECB policy back in spotlight

ecb

A second month of high inflation in Germany in January will likely prompt a fresh round of complaints against the European Central Bank’s loose monetary policy, analysts predicted.

Consumer prices in Europe’s largest economy rose by 1.9 percent year-on-year, federal statistics office Destatis said in preliminary data released Monday, up from a rate of 1.7 percent recorded in December.

The last time inflation was that high in Germany was in July 2013, the statisticians observed.

Analysts surveyed by Factset had been pencilling in an inflation rate of 2.0 percent for December.

“German ECB-bashing is very likely to gain further momentum” in the wake of the latest figures, analyst Carsten Brzeski at ING Diba bank said.

The ECB has set interest rates at historic lows as well as buying up tens of billions of euros in government and corporate bonds to try and drive growth and boost inflation towards its target of just below 2.0 percent.

With inflation now around those levels in Germany, calls from leading economists, politicians and newspapers are growing louder for the ECB to raise interest rates.

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