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”The latest batch of buoyant inflation data from Germany, coupled with another pickup in euro-zone bank lending, is cranking up the pressure on the European Central Bank to reconsider its record-low interest rate despite the continuing concerns over the sovereign-debt crisis.
Preliminary data for individual German states published Friday indicate that rising energy and food prices propelled pan-German inflation to its highest level in well over two years.
‘The current spike in headline inflation has not made life easier for the ECB,’ said Dirk Schumacher, an economist at Goldman Sachs in Frankfurt.
Inflation is rising across the 17 countries that use the euro and, if sustained, economists warn it could prompt the ECB to lift its key interest rate early. Inflation edged above the sensitive 2% threshold in February in North Rhine-Westphalia, Germany’s most populous state, and also in Bavaria and Saxony, official data showed. Although pan-German data haven’t been released, the pickup won’t go by unnoticed at the ECB, providing more ammunition to the inflation hawks on the bank’s governing council who have warned that rates won’t stay at record lows indefinitely.
‘If German HICP inflation in February comes in at 2.2%, it would increase the chance that inflation across the euro-area will rise to 2.5% in February. That would be a more significant number for the ECB,’ said Fabio Fois, an economist at Barclays Capital.”
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