German inflation inches up in August: preliminary data

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Frankfurt am Main (AFP)

The pace of inflation in Germany increased slightly in August, preliminary official figures showed Wednesday, inching closer towards the European Central Bank's eurozone-wide target.

Consumer prices rose by 1.8 percent year-on-year this month in Europe's largest economy, federal statistics authority Destatis reported.

August's rate of price growth was 0.1 percentage points higher than in July, in line with predictions from analysts surveyed by data company FactSet.

Using the ECB's preferred yardstick, the Harmonised Index of Consumer Prices, inflation picked up 0.2 percentage points compared with July's level to reach 1.8 percent.

That pace is near the Frankfurt-based institution's target of close to, but below 2.0 percent for the whole 19-nation euro area.

Looking at the different elements of the consumer price basket, growth in energy and food costs sped up, with energy inflation hitting 2.3 percent after a slump to zero in June.

Meanwhile, price growth in services including home rents slowed, while the cost of goods increased slightly faster in August than in July at 2.0 percent.

The ECB's mass bond-buying programme and historic low interest rates are designed to encourage lending, promoting growth and driving inflation towards the bank's target.

Central bank chiefs have in recent months highlighted the importance of core inflation -- excluding volatile food and energy costs -- as a measure of the effectiveness of their easy-money policy.

"The core rate in Germany might rise further given the continued strength of German GDP growth and the fact that the economy is already operating at around capacity," Capital Economics analyst Jennifer McKeown commented on regional inflation data released earlier Wednesday.

"But some of the pressure on inflation will be offset by the recent rise in the euro exchange rate," she added.

With inflation across all 19 eurozone members at just 1.3 percent last month, the central bank remains far from its target -- meaning its interventions in the economy are likely to be wound down only slowly in the coming months and years.