German inflation hits 4-1/2 year high in February

The rate is the highest since January 2013 and is slightly above the ECB's target of just below 2%.

With overall savings of 5 trillion euros ($5.28 trillion) and interest rates at zero, an inflation of two percent means German savers are basically losing 100 billion euros per year, he added.

As recently as May of last year, consumer prices were below their levels of a year earlier, and the 1% level was breached for the first time in more than three years as recently as December.

The ECB's inflation target "below, but close to 2%" has been crossed, according to the preliminary February estimate released yesterday.

Unemployment in the 19-country single currency area in January meanwhile was 9.6 percent, unchanged from December but holding at its lowest rate since May 2009, the Eurostat statistics service said.

Inflation in Germany rose in February, reaching its highest level in four-and-a-half years, mainly due to more expensive energy and food.

The goods-producing sector expanded at its strongest rate in almost six years in February, suggesting factories will push up overall growth at the start of 2017.

In April, the central bank will reduce its monthly asset purchases from €80 billion to €60 billion, as agreed at the end of a year ago.

The ECB will announce its latest decision next Thursday, when it is expected to leave policy unchanged.

But the main event in the euro zone on Thursday was flash inflation for February due at 1000 GMT.

Producer prices - the amount that manufacturers charge - jumped to an annual 3.5 percent rate, from January's 1.6 percent, indicating further increases ahead.

In December, the European Central Bank said it would extend its bond-buying programme until at least December 2017, although the €80bn-a-month quantitative easing (QE) scheme will be trimmed to €60bn a month from April.

A top European Central Bank official is warning that the bank's stimulus measures are easing pressure on indebted governments to straighten out their finances.

A sustained rebound in German inflation would give Bundesbank President and European Central Bank rate-setter Jens Weidmann more grounds to argue for a reduction in the ECB's bond-buying program, a scheme that he has often criticized. But he underlined Wednesday what he considers the unwanted side effects of the ECB's efforts.

  • Wendy Palmer