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The
consumer price figures, published by the Federal Statistics
Office, are likely to fuel the political debate in Europe's
biggest economy about an end to the ECB's loose monetary policy.
However, ECB rate setter Ewald Nowotny already made clear on
Monday that the central bank will probably first review its
monetary policy stance in June and stop short of any decision on
winding down its huge stimulus program.
German consumer prices, harmonized to compare with other
European countries (HICP), rose by 1.9 percent after an increase
of 1.7 percent in December, the Federal Statistics Office said.
The data came in slightly weaker than a Reuters consensus
forecast for a rise of 2.0 percent. Still, it was the highest
annual inflation rate since July 2013.
"The time of low inflation rates in Germany is over," Sal.
Oppenheim economist Ulrike Kastens said, adding that the higher
oil price would catapult the German inflation rate above the
2-percent-threshold in coming months.
For 2017 as a whole, German inflation will soar to 1.8 percent,
Kastens predicted.
A breakdown of the non-harmonized inflation data showed that
rising energy prices and higher food costs were the main drivers
behind the overall increase in January.
"Following today's inflation data, German ECB-bashing is very
likely to gain further momentum," ING chief economist Carsten
Brzeski said.
"Obviously, increasing inflation – no matter what the drivers
are – combined with low interest rates leads to even more
negative real interest rates and hurts savers," he added.
The central bank of the 19-member single currency bloc has
unleashed unprecedented stimulus in recent years, cutting
interest rates aggressively and pumping more than a trillion
euros into the economy through asset purchases.
For the euro zone as a whole, economists polled by Reuters
expect the inflation rate, due on Tuesday, to rise to 1.5
percent in January after 1.1 percent in December.
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 program more quickly.
Brzeski said a "relatively reasonable and face-saving
compromise" for German policy makers and the ECB would be to
announce a so-called tapering in the summer, namely a further
reduction of the monthly QE purchases from January 2018 onwards.
(Reporting by Michael Nienaber; Editing by Joseph Nasr/Jeremy
Gaunt)
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