Higher Energy Prices Fuel German Inflation

German consumer prices rose sharply in March, official data showed Tuesday, powered by higher energy costs and one-off factors linked to the coronavirus pandemic

Frankfurt, (APP - UrduPoint / Pakistan Point News - 30th Mar, 2021 ):German consumer prices rose sharply in March, official data showed Tuesday, powered by higher energy costs and one-off factors linked to the coronavirus pandemic.

Inflation reached 1.7 percent year-on-year, up from 1.3 percent in February, according to provisional figures released by the federal statistics agency Destatis.

German consumer prices have been on an upward trend since the start of year, partly due to the reversal of a temporary sales tax in Europe's top economy as well as the introduction of a carbon tax.

But March's rise was mainly driven by a 4.8 percent increase in energy prices, Destatis said.

German inflation is set to pick up even more in the coming months as ongoing shutdowns distort prices and incidents like the Suez Canal jam upset supply chains, said ING bank economist Carsten Brzeski.

"For German (and eurozone) inflation, the only way is up," he said, predicting German consumer prices could rise by three to four percent this year.

Using the European Central Bank's preferred yardstick, the Harmonised Index of Consumer Prices (HICP), German inflation rose by 2.0 percent year-on-year -- overshooting the ECB's inflation target of "close to, but below" 2.0 percent.

ECB chief Christine Lagarde said earlier this month that rising consumer prices were a result of "temporary factors" linked mostly to the pandemic and would not prompt the bank to tighten its ultra-loose monetary policy anytime soon.

The ECB has stressed "its commitment to maintaining favourable financing conditions and to look through temporarily higher inflation. Today's German inflation numbers suggest that this commitment has not come a moment too soon," Brzeski noted.