German inflation rose to 2.4 per cent in May, its highest rate in more than two years, in a move likely to intensify debate about whether Europe’s ultra-loose monetary policy could cause the region’s largest economy to overheat.

The federal statistical agency said on Monday that the harmonised index of consumer prices had reached a level last seen in October 2018, mainly due to a 10 per cent year-on-year increase in energy prices.

Conservative commentators in Germany have long feared excessive inflation and worry that the ECB’s loose monetary policy is causing the cost of living to spiral upwards. The Bundesbank has forecast that monthly inflation could hit 4 per cent later this year. 

German inflation has risen faster than in most other eurozone countries since the start of the year, driven by a reversal of the temporary cut in German value added tax, a new carbon tax and a reweighting of the basket of products used to calculate prices.

Earlier on Monday, Spain’s statistical agency said its inflation rate had climbed from 2 per cent in April to 2.4 per cent in May, mainly due to higher energy prices. In the same period, Italian inflation rose from 1 per cent to 1.3 per cent, the country’s national statistics institute said.

Figures for price growth in the eurozone will be published on Tuesday. Economists polled by Reuters expect inflation in the bloc to rise from 1.6 to 1.9 per cent in May. That would be in line with the European Central Bank’s target of just below 2 per cent, but its policymakers are expected to keep monetary policy unchanged when they meet next week.