BERLIN Jan 2 Germany's annual inflation rate
rose for the first time in fourth months in December on
increases in food and package holiday prices, breaching the
European Central Bank's target threshold for the broader euro
zone of 2 percent.
Compared to the prior year period, prices increased 2.1
percent in the final month of 2012, preliminary data from the
Federal Statistics Office showed. On the month, consumer prices
rose 0.9 percent.
Economists surveyed by Reuters had been expecting more
modest rises of 1.9 percent year-on-year and 0.7 percent on a
"Food prices, hotels and package holidays were the key
culprits for an inflation increase in December in Germany," said
Christian Schulz, senior economist at Berenberg.
"The data are unlikely to affect the ECB's interest rate
decision next week much, although it may add a little bit more
weight to the arguments of those on the Governing Council
opposing further monetary stimulus," he added.
Eurozone inflation in December is forecast at 2.1 percent on
the year, a slight fall from November's 2.2 percent.
Germany's inflation rate remained above the ECB's broader
euro zone target of close to but below 2.0 percent for much of
2012 as its economy outperformed European peers, fueling robust
The government and the country's central bank have both
hinted they would tolerate higher prices as long as euro-wide
inflation remains under control. That could help ailing euro
zone countries boost their competitiveness.
A Reuters poll conducted late last year showed that
economists were evenly divided about whether the ECB hold its
main refinancing rate steady at a record low of 0.75 percent
through the first quarter of the year or cut the rate to 0.5