Germany: Higher inflation persists in March as energy costs remain elevated
March 29, 2011
In March, consumer prices rose 0.5%, according to a preliminary flash estimate released on 29 March by the Federal Statistics Institute (Destatis). The monthly rise matched the 0.5% increase observed in February and was primarily driven by rising prices for heating oil and motor fuels. Despite the pronounced monthly rise, annual inflation remained steady at 2.1% in March, which was in line with market expectations. At the current level, inflation hovers just above the European Central Bank's target of close to but below 2.0% over the medium term, underlining prospects for a rate hike by the ECB, which has kept interest rates at a record-low of 1.00% since May 2009. Complete and more detailed inflation data will be published on 12 April. Furthermore, HICP inflation (based on the harmonized index of consumer prices) remained unchanged at 2.2% in March. The Bundesbank anticipates inflation will fall to 1.7% this year and inch down further to 1.6% in 2012.
Author: Ricardo Aceves, Senior Economist