If Mario Draghi thought he was already getting heat from Germany, it could be about to get a lot worse.
Consumer prices have continued to rise in Germany during the month of January, with the inflation rate reaching the 1.9-percent target set by the European Central Bank led by Mr. Draghi.
The preliminary data from Germany's statistical office, if confirmed, would mark a significant jump for a country that has a long history of being wary of inflation. Prices are now rising at the highest rate since mid-2013.
“The time of low inflation is passe,” said Ulrike Kastens, analyst with the private bank Sal. Oppenheim. Ms. Kastens said the inflation rate would likely break the 2-percent mark in the coming months.
Following today’s inflation data, German ECB-bashing is very likely to gain further momentum. Carsten Brzeski, ING-Diba Chief Economist
The inflation has been driven largely by a spike in oil prices. Over the course of 2016, the price of a barrel of oil jumped from $30 to $55. In Germany, energy prices jumped 5.8 percent year-over-year while food prices rose 3.2 percent and rent increased 6 percent.
Carsten Brzeski, the Frankfurt-based chief economist of ING-Diba, says there's little the European Central Bank can do about the higher energy prices. Yet ECB Chief Mario Draghi will still likely face growing pressure to rein in the central bank's loose monetary policy, now that Europe's largest economy has met its inflation target.
"Following today’s inflation data, German ECB-bashing is very likely to gain further momentum," Mr. Brzeski said in a research note.
The ECB has been buying 80 billion worth of bonds every month with the aim of stimulating inflation to just below 2 percent.
In December, the ECB renewed its bond-buying program for another nine months, but will scale back the monthly volume to €60 million starting in April.
But the decision to scale back the monthly volume doesn't go far enough for critics of the bond-buying program like German central bank chief Jens Weidmann.
Mr. Wiedmann has called on the ECB to start phasing out its bond-buying program. Savers in Germany are being pitched by rising inflation combined with the ECB's ultra low interest rates.
The ECB's answer has been steady throughout the criticism coming from Germany: The central bank has to keep watch over all 19 members of the euro zone, not just Germany. And inflation in most other euro zone economies has yet to reach the ECB's target like it now has in Germany. Mr. Draghi pleaded for "patience" from Germany earlier this month as he works to revive the entire euro zone.
Still, Mr. Brzeski says the spat has been damaging: "The current public debate between Germany and the ECB almost looks like an artificial dispute or semantic discussion with one big loser: the ECB’s credibility."
Jan Mallien is Handelsblatt's monetary policy correspondent in Frankfurt. Christopher Cermak and Spencer Kimball of Handelsblatt Global contributed to this story. To contact the author: [email protected]