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German inflation surpasses ECB target

Inflation in Germany has hit the highest level in four years, the National Statistics Office has reported while releasing preliminary data for February. The surge was attributable to a hike in energy costs.

Inflation in Europe's powerhouse hit 2.2 percent in February, the statistics agency announced on Wednesday while presenting preliminary figures.

The price increase reading for the month under review was the highest since August 2012, slightly outpacing a 2.1-percent forecast from analysts surveyed by Factset.

More importantly, the year-on-year jump in February outstripped the European Central Bank's own price stability target for the euro area of little under 2.0 percent.

Energy costs jumping

With federal elections set for September in Germany, the inflation figures are likely to fuel debate about an end to the ECB's loose monetary policy. The lender has slashed interest rates and adopted a bond-buying program worth 2.3 trillion euros ($2.42 trillion) to pump money into eurozone economies.

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ECB buys corporate bonds

German central bank chief Jens Weidmann will now see even more grounds to argue for a speedy reduction of the ECB's bond-buying scheme, a program he has often criticized in the past.

On the other hand, the February inflation hike was first and foremost attributable to a 7.2-percent increase in energy costs. However, core inflation strips out volatile items such as energy and food costs, suggesting that consumer price hikes adjusted that way will remain rather weak in Germany in the months ahead.

Seen against this background, "this should encourage the ECB to implement its asset purchases as planned," Capital Economics analyst Jennifer McKeown told Reuters.

hg/jd (dpa, AFP, Reuters)

 

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