Energy prices drive German inflation up again in February

FRANKFURT: German inflation rose again in February, official data showed on Tuesday, as the crisis in Ukraine added to fears that energy prices could keep inflation in the eurozone higher for longer.

Consumer prices rose by 5.1 per cent annually in February, according to the federal statistics agency Destatis, after the pace slowed in January to 4.9 per cent.

The renewed rise dashed previous expectations that inflation would progressively ease after reaching a decades-high peak of 5.3 per cent in December.

The continued squeeze on prices was down to “Covid-19-related effects such as delivery bottlenecks”, while “energy product prices continue to have an impact”, Destatis said in a statement.

The longstanding pressures were “superimposed by uncertainties caused by the Russian attack on Ukraine”, which threatens to further increase the price for energy, Destatis said.

Supplies of oil and, in particular, gas have been caught amid rising tensions between the West and Russia, a major supplier to European countries.

“The development of gas and crude oil prices is likely to remain decisive for the development of German consumer prices in the coming months,” said Fritzi Koehler-Geib, chief economist at the public lender KfW.

“The Russian war of aggression in Ukraine is counteracting a gradual stabilisation of energy prices and a gradual decline in the high inflation rates,” she said, adding that further sanctions against Russia could lead to “new rises”.

The figures for Europe’s largest economy will add to expectations of a fresh rise when eurozone inflation figures are published on Wednesday.

On the harmonised index of consumer prices, the European Central Bank’s preferred measure, inflation in Germany rose from 5.l per cent to 5.5 per cent, according to Destatis.

Already well above the bank’s two-per cent inflation target, accelerating inflation could add to pressure for the ECB to tighten monetary policy faster when it meets next week.