German Inflation Jumps 2.2%, Surpassing ECB Target And Highest Since 2012

Following a series of "hot" inflation prints from Germany's states, moments ago German inflation rose more than expected, printing at 2.2% above the 2.1% consensus estimate, up from 1.9% in January and surpassing the ECB's target of a rate just under 2 percent for the first time since August 2012, the peak of the Eurozone debt crisis.

With Germany headed for federal elections in September, the inflation figures will add more fuel to the debate about an end to the European Central Bank's loose monetary policy.

Earlier on Wednesday, preliminary data from several German states showed that consumer price inflation accelerated across the country, mainly driven by higher food, energy and transportation costs. In the most populous state, North Rhine-Westphalia, annual inflation rose to 2.3 percent from 1.9 percent in January. It reached 2.5 percent in Hesse, 2.2 percent in Baden-Wuerttemberg, 2.1 percent in Bavaria, 2.0 percent in Brandenburg and 2.4 percent in Saxony.

The state readings, which are not harmonised to compare with other euro zone countries, fed into the just as hot nationwide inflation print released moments ago. 

Yet not everyone was convinced Germany's blistering headline inflation would be a hindrance to the ECB. Cited by Reuters, Capital Economics analyst Jennifer McKeown said the state readings supported the forecast, but German core inflation, which strips out volatile energy and food costs, was likely to remain weak in the coming months.  "This should encourage the ECB to implement its asset purchases as planned," McKeown said.

That said, a sustained rebound in German inflation would give Bundesbank President and ECB rate setter Jens Weidmann more grounds to argue for a reduction in the ECB's bond-buying programme, a scheme that he has often criticised. The German central bank has warned that homes in large German cities are 15 to 30% overpriced, in a message that stoked further fears about the side-effects of the ECB's stimulus.

The inflation rate for the entire euro zone is expected to rise to 2.0 percent in February from 1.8 percent in January, economists polled by Reuters said. Those figures are due on Thursday.