"There is a heightened sensitivity to inflation trends in the post-Katrina world," he said.

The figures were in line with market expectations but show no halt to the continuing inflation trend in Germany.

The core, or underlying, rate is what remains when economists strip away volatile components, generally energy and food, that can mask the basic inflation trend.

"But the reason the market indexes are slightly down is the inflation trend."

The rising cost of imports has clearly become an important factor in assessing inflation trends.

Many economists say labor costs are the most important factor determining inflation trends.

Either the inflation trend will keep going up, or it will flatten out.

That means that unit labor costs, a good indicator of basic inflation trends, are likely to rise a bit faster.

It won't because there is a strong underlying inflation trend.

Further out, a higher inflation trend threatens, eroding these competitive gains.