Inflation in Germany accelerated to its fastest annual rate in 2-1/2 years, data showed on Wednesday, feeding speculation that the European Central Bank could raise interest rates again this summer. Preliminary data from the German statistics office's consumer price index (CPI) showed households had to pay 2.4 percent more for goods and services in April compared to the same period last year, a rate last topped in October 2008.
The EU-harmonised measure of inflation jumped to 2.6 percent from 2.3 - a figure that will grab the attention of the ECB. "Every negative surprise like this one makes it that much more probable that the European Central Bank will hike rates again sooner rather than later," said Goldman Sachs economist Dirk Schumacher.
Last month, headline German inflation came in at 2.1 percent while for the euro zone as a whole it jumped to 2.7 percent, well above the European Central Bank's target of close to but below 2 percent. Barclays Capital economist Francois Cabau said Germany's data suggested the flash reading of euro zone inflation, due on Friday, would hold at 2.7 percent year-on-year in April.
ECB Governing Council member Athanasios Orphanides warned on Wednesday that further interest rate adjustments would be needed if the inflation outlook worsened. Germany's forward-looking GfK consumer morale index contracted more than expected, French consumer confidence was unchanged from March and Italian consumer confidence fell sharply, hitting its lowest level for more than two years.
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