Wiesbaden, Germany, March 26 (Bloomberg) -- German import and factory pricesincreased more than expected in February, making it difficult for the EuropeanCentral Bank to justify a possible reduction in interest rates on Thursday. Import prices rose 0.6 percent in February from the previous month and 5.4 percentin the year, the Federal Statistics Office said. Producer prices rose 0.3 percent fromJanuary and increased 4.7 percent from February 2000, a separate report showed. Economists surveyed by Bloomberg News had expected import prices to rise 0.3percent and producer prices to increase 0.2 percent from January. ``The increases won't help the ECB sell a rate cut'' as early as Thursday, saidBernd Weidensteiner, an economist at DG Bank AG in Frankfurt, who expectslower borrowing costs in April. The cost of crude oil rose to a three-month high of $29.91 in early February, makingimports more expensive and increasing the cost of production. ECB officialssignaled last week they are now less concerned about inflation as the globaleconomy slows, suggesting the bank wants to lower borrowing costs soon. Volatile oil prices are a ``short-term influence'' that monetary policy cannot target,the ECB's Chief Economist Otmar Issing said on Thursday. On Friday, ECB councilmember Jean-Claude Trichet said the bank has changed it inflation assessment andis no longer worried about prices. Interest rate futures show investors are counting on a rate cut in coming weeks. Theimplied yield on the Euribor April contract stood at 4.42 percent Friday, 33 basispoints below the ECB's benchmark rate. Last Monday, the yield was 4.66 percent.
Inflation
Consumer prices in the 12 nations sharing the euro rose 2.6 percent in Februaryfrom 2.4 percent in January, remaining above the ECB's 2 percent target for a ninthstraight month. Annual inflation in Germany declined to 2.4 percent in March, basedon European Union standards. Inflation may take some time to fall further, because many companies are stillpassing on past increases in the cost of oil and imported raw materials.Schmalbach-Lubeca AG, a packaging company owned by Allianz AG, said earlierthis month it will raise prices this year to compensate the high cost of materials. It will be a difficult ``first half with continuous high energy and raw materials costs,''Perry W. Premdas, CFO of Celanese AG, said at a press conference onWednesday. The biggest maker of acetate in fabric and filters raised chemicalsprices in the first quarter and plans more increases in the second quarter. Still, as economies across the world slow, prices for oil and other imports shoulddecline in coming months. ``No inflationary pressures are to be expected from acooling global economy,'' the ECB's Issing said. Excluding oil and energy-related products, February import prices rose 0.2 percentin the month and climbed 5.3 percent in the year, today's report showed.