Wiesbaden, Germany, Feb. 26 (Bloomberg) -- German consumer prices were unchanged last month as a stagnating economy reduced companies' room to raise prices. Consumer prices were unchanged from December, the Federal Statistics Office said. A preliminary report released on Jan. 24. said they rose 0.9 percent. From a year ago, prices gained 1.1 percent. Germany has the lowest inflation rate among the dozen euro nations. Economists expect inflation in the region to slow to 2.2 percent in January from 2.3 percent in December. The economy stagnated in the fourth quarter, the government said today.
``I don't see signs of rising inflation in Germany,'' said Volker Nitsch, an economist at Bankgesellschaft Berlin. ``Germany will help to keep inflation in Europe down, though for a decline to substantially below 2 percent, we need slower increases in the peripheral countries'' like Portugal and Ireland. The European Central Bank, which aims to keep inflation in the 12 euro nations below 2 percent, expects the annual rate to drop below that level this year. Slowing economic growth in the region may help, policy makers have said. ``The perspective of an economic recovery this year is no longer supported by the most up-to-date information,'' ECB President Wim Duisenberg told a press conference on Saturday. The ECB will probably revise down its economic growth forecasts.
Stagnating Economy
The statistics office said earlier today that the German economy stagnated in the fourth quarter. Starting with today's report, the base year for the index is changed to 2000 from 1995. Separately, the institute amended the basket of goods and services it monitors. Concern about a war with Iraq has boosted oil prices by about 40 percent since mid-November. Producer prices rose at the fastest rate in 21 years and import prices gained for a second month in January, reports earlier this week showed. Excluding oil, import prices fell. The German government at the beginning of the year raised taxes by 3.1 cents a liter on petrol and by 0.26 cents a kilowatt hour for electricity. The tobacco levy also increased.
Six German states are expected to release preliminary February inflation figures from today. Economists expect pan- German consumer prices to have risen 0.4 percent from January and 1.2 percent in the year. The statistics office will probably release the report tomorrow. The ECB's 18 policy makers meet next week in Frankfurt to set interest rates for the dozen nations sharing the euro. Investors expect the bank to lower borrowing costs by the end of the first half the latest, futures contracts show. The implied yield on the June Euribor contract was 2.27 percent at 9:25 a.m Frankfurt time, compared to a current three- month lending rate of 2.57 percent. The ECB's main refinancing rate, the lowest it may charge to banks for loans, is 2.75 percent. //www.quote.bloomberg.com