BERLIN, Aug 16 (AFP) - Germany's central bank, the Bundesbank, said Monday that further hikes in oil prices could pose serious problems for the recovery of the eurozone's biggest economy and increase inflation.
"The hoped-for recovery in domestic demand in Germany could be additionally hampered by further oil price rises," it said in its August monthly report.
"At the current oil price level, the general recovery scenario is not at risk, as most economic forecasts already assumed a relatively high oil price this year and next," it went on.
"But if oil prices continue to rise ... this would carry serious risks for the prevailing economic scenario."
According to figures published on Thursday, German gross domestic product (GDP) grew by 0.5 percent in the second quarter, compared to 0.4 percent in the first three months of the year.
Analysts have been generally optimistic about the recovery in Germany after three years of stagnation.
The central bank said the second-quarter growth figures had reinforced expectations of a continued, albeit mild, economic rebound in the second half.
There is even the possibility of slightly better growth than initially expected, it said.
The bank warned however that inflation could increase if oil prices rise again.
But it said inflation should remain below two percent this year and next as long as current oil prices do not lead to "second round effects", such as increased pressure on wages.