By Nina Adam and Paul Hannon
Germany's inflation rate hit its highest level since mid-2013 during January, a development that is likely to amplify calls for an end to European Central Bank stimulus from within the eurozone's largest member.
Rising oil prices propelled Germany's annual inflation rate, measured according to harmonized European Union standards, to 1.9% from 1.7% in December, the country's statistics body said Monday. It is the highest rate since July 2013, bringing German inflation in line with the ECB's medium-term objective. The ECB aims to anchor eurozone-wide inflation at just below 2%.
A jump in inflation in December had led to calls from German economists and politicians for an end to a series of stimulus programs launched by the ECB, including a EUR2.3 trillion ($2.47 trillion) bond-purchase program that is due to run until the end of 2017, and possibly beyond.
Sabine Lautenschläger, a German who sits on the ECB's six-member executive board, said last week she hoped the central bank could "soon turn to the question of an exit" from stimulus policies.
Economists say that rising inflation across the eurozone could dampen growth later in the year, since it would weaken households' spending power unless wages were to rise at a similar pace.
"We are suffering a negative supply shock (from rising oil prices), and with that comes bad inflation," said Ruben Segura-Cayuela, an economist at BAML in London.
Ewald Nowotny, who sits on the ECB's Governing Council as head of Austria's central bank, said Monday that the ECB might start to signal a gradual withdrawal from its bond-purchase program over the summer.
"Sometime before the end of 2017 we will be discussing what happens in the future," he said. "I am not saying we will make a decision [on tapering] in [the] summer, [but] we will have better information for making a decision in [the] summer."
Mr. Nowotny's remarks come amid signs of strength in the eurozone's EUR10 trillion economy.
The European Commission said Monday that its Economic Sentiment Indicator, which aggregates business and consumer confidence, rose to 108.2 in January from 107.8 in December--the highest level since March 2011.
The pickup in business confidence was led by industry, with the measure for that sector rising to 0.8 from zero in December, its highest level since June 2011. Services confidence also firmed, although retailers and construction companies were less upbeat.
Spain's INE statistics body, meanwhile, said the Spanish economy expanded by 0.7% in the fourth quarter of 2016 compared with the previous quarter. As a consequence, the eurozone's fourth-largest economy grew 3.2% last year.
Spain's economic expansion was powered by jobs creation and consumer spending, but economists caution that growth may ease this year as the benefits of jobs creation, low inflation and cheap financing moderate.
Write to Nina Adam at firstname.lastname@example.org and Paul Hannon at email@example.com
(END) Dow Jones Newswires
January 30, 2017 09:02 ET (14:02 GMT)
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