Data from several German states suggests overall German consumer inflation inched up in November, as the economy and labour market boomed — supported by loose euro zone monetary policy — and food and fuel costs rose.
The figures, which will be followed by national inflation data due at 1300 GMT, prompted investors to pile into German government bonds in the expectation that rising prices will lead the European Central Bank to reduce stimulus.
Early data from the states of Saxony and Hesse showed year-on-year inflation hitting 2 percent, while figures from the states of Brandenburg and Bavaria showed inflation picking up.
In Germany’s most populous state, North Rhine-Westphalia, annual inflation accelerated to 1.8 percent from 1.6 percent in October.
German 10-year government bond yields were 2 basis points higher at 0.36 percent and most other euro zone bond yields were also higher by 1-2 basis points on the day.
Food costs rose particularly strongly across the states that reported early on Wednesday, but rising fuel and transport costs also made a strong contribution to overall increases.
The state readings are not harmonised to compare with other euro zone countries.
A Reuters poll conducted before the release of the regional data suggested consumer prices harmonised to compare with other European countries rose by 1.7 percent on a year-on-year basis in November from 1.5 percent the month before.
The inflation rate for the entire euro zone, due on Thursday, is expected to have risen to 1.6 percent in November from 1.4 percent in October, economists polled by Reuters said.
Source: Reuters (Reporting by Thomas Escritt; Editing by Catherine Evans)