German inflation accelerates to 2.1pc in April, exceeding ECB target

BERLIN: German annual inflation picked up to 2.1 percent in April, exceeding the European Central Bank's target level for the first time since November, preliminary data showed on Tuesday.

German consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose by 2.1 percent year-on-year after an increase of 1.4 percent in the previous month, the Federal Statistics Office said.

That was a far sharper rise than the 1.7 percent forecast by economists in a Reuters poll and euro zone stocks and German bond yields rose after the data.

The ECB aims to keep inflation in the euro zone close to, but just below, 2 percent a year.

Inflation has long been below this target in the single currency bloc, and ECB rate-setter Olli Rehn said on Friday that investors may be doubting the effectiveness of the ECB's monetary policy measures in boosting inflation.

Inflation in the euro zone is expected to be on a downward path this year, reflecting the growth slowdown and a drag from energy prices. Despite the ECB pursuing an accommodative monetary policy, inflation is not expected to hit the central bank's target for years to come.

On the month, EU-harmonised prices rose by 1.0 percent, the preliminary numbers showed. This compared with market expectations for an increase of 0.6 percent.

ING economist Carsten Brzeski said data from the German states - which feed into the nationwide preliminary inflation data - showed the acceleration was, however, largely due to the cost of package holidays going up, with Easter falling later this year than last, and partly due to higher fuel prices.

Economists expect annual euro zone inflation - due to be published on May 3 - to accelerate to 1.6 percent from 1.4 percent in March.