By Rainer Buergin
Frankfurt, March 22 (Bloomberg) -- Consumer prices rose in three German states this month from February, as rising energy costs more than offset a drop in food prices, reports showed. Prices for goods and services in Saxony gained 0.1 percent in March and rose 1.6 percent from a year ago. Inflation accelerated to 2.1 percent in Baden-Wuerttemberg and 1.7 percent in Hesse. The price of crude oil has risen 28 percent since the start of the year on expectations that an economic rebound will boost demand for fuel. A rise in energy costs may push up inflation and prompt the European Central Bank to raise borrowing costs in coming months as growth picks up. ``German inflation likely rose more than expected in March,'' said Silvia Pepino, an economist at J.P. Morgan & Co. Inc. in London. ``Euro area inflation is clearly proving stickier than anticipated.'' German inflation numbers together with figures from Italy give the European Central Bank a first idea about price developments in the dozen nations using the euro. Italian goods and services cost 0.2 percent more than in February, exceeding economists' estimates. The annual inflation rate was 2.6 percent, the highest since September.

Inflation Goal
The ECB aims to keep inflation across the region below 2 percent, a goal it's missed for 21 months. The inflation rate fell to 2.4 percent in February from 2.7 percent in January. ECB Chief Economist Otmar Issing said ``recent data point to a recovery starting moderately in 2002 and accelerating through the course of the year. There is still ``some uncertainty'' about the strength of the recovery, he said. The ECB may raise interest rates as early as June, a survey of 316 analysts and institutional investors by Germany's ZEW institute showed. ``The ECB won't further loosen monetary policy,'' ZEW economist Peter Westerheide said in a newspaper interview. Interest rate futures suggest the same. The yield on the three-month Euribor contract maturing in June was 3.62 percent, while the September contract yielded 3.98 percent. The three reports, which account for about 40 percent of Germany's inflation index, are the first of six regional releases before the Federal Statistics Office will publish a preliminary inflation number for the whole of Germany, probably on Monday. Heating oil prices jumped 7.2 percent in Saxony and 8.2 percent in Baden-Wuerttemberg. In Hesse, household energy cost 1 percent more than in February and transportation costs rose 1.1 percent. Following is a breakdown of monthly and annual consumer price performance in the six German states. Previous month's performance is noted in parentheses. An ``n.a.'' indicates the state has not yet reported: monthly yearly change change North Rhine-Westphalia n.a. (+0.4%) n.a. (+1.5%) Baden-Wuerttemberg 0.3% (+0.3%) 2.1% (+1.9%) Hesse 0.2% (+0.3%) 1.8% (+1.7%) Bavaria n.a. (+0.2%) n.a. (+1.8%) Saxony 0.1% ( 0.0%) 1.6% (+1.6%) Brandenburg n.a. (+0.2%) n.a. (+1.7%)