MNI BRIEF: German Inflation Surge Temporary: Buba's Weidmann

Sharp increases in German inflation is unlikely to be sustained beyond next year, the head of the Bundesbank said Wednesday, citing temporary increases due to one-off factors and the absence of both strong wage growth and a surge in demand once lockdown measures end.

"Upside risks to the price outlook do exist," Jens Weidmann said, although he noted that "overall the picture is rather balanced," with Bundesbank analysts suggesting up to 2% of January's inflation rise was caused by the end of the VAT cut, new carbon emissions pricing, and updated HICP measures.

Weidmann called on fiscal policymakers to "avoid changing expectations of the role of government, as this would serve to weaken rather than strengthen the innovative forces in our market economy," in apparent contrast to recent remarks by ECB Executive Board member Isabel Schnabel, who said increased public investment leads to greater private investment.