German inflation hits 3-1/2 year high in January

[BERLIN] German annual inflation increased further in January, hitting the highest level in three-and-a-half years to reach the European Central Bank's price stability target of just under two per cent, preliminary data showed on Monday.

German consumer prices, harmonised to compare with other European countries (HICP), rose by 1.9 per cent on the year after an increase of 1.7 per cent in December, the Federal Statistics Office said.

The data came in slightly weaker than a Reuters consensus forecast of two per cent. Still, it was the highest annual inflation rate since July 2013.

On a non-harmonised basis, German annual inflation picked up to 1.9 per cent after 1.7 per cent in December.

Rising energy prices and higher food costs were the drivers behind the overall increase in January, a breakdown of the non-harmonised data showed.

The figures are likely to further fuel the political debate in Europe's biggest economy about an end to the ECB's loose monetary policy.

A sustained recovery in German inflation would give Bundesbank President and ECB rate-setter Jens Weidmann more scope to argue for winding down the ECB's bond-buying programme more quickly.

REUTERS