German Inflation Holds at One-Year High on Energy and Food

(Bloomberg) -- Germany’s annual inflation rate remained at a one-year high in February after food prices increased and the introduction of a carbon levy at the start of the year bolstered transportation and heating costs.

Consumer prices were up 1.6% from a year earlier, the country’s statistics office said on Monday. German inflation surged in January, partly reflecting the expiration of temporary sales-tax cuts, a boost in the country’s minimum wage and changes to the composition of the price basket.

The Bundesbank said in its latest monthly report that special factors will continue to impact inflation in the coming months. It predicts the headline rate will average 1.8% this year, the highest since 2018.

A pickup in inflation will generally be welcomed by European Central Bank officials who have unleashed repeated salvos of monetary stimulus to ignite price growth. Policy makers have also stressed though that they will react only to shifts reflecting improvements in underlying demand.

Global government bond yields have been rising on a more positive growth outlook, especially in the U.S. where massive fiscal stimulus is under way. The recovery in the euro area, however, appears to be lagging behind other developed economies partly because of the slow roll-out of vaccines.

Eurostat is due to release a gauge of euro-area inflation on Tuesday.

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