* Preliminary harmonised CPI +2.0 pct y/y vs Dec 1.9 pct
* Case for ultra-low ECB interest rates seen weakening
* Germany expected to see second-round inflation effects
* Underlying consumer prices trending upwards
(Adds new economists comments, graphics link, background)
By Christiaan Hetzner
BERLIN, Jan 27 (Reuters) - German consumer prices rose at their fastest pace since October 2008 this month, data showed on Thursday, offering early signs that inflation in the euro zone may now be high enough to be of concern to the European Central Bank.
EU-harmonised prices (HICP) grew 2.0 percent year on year in January compared with 1.9 percent in December.
The hike missed the 2.2 percent expected by a Reuters poll and was driven in part by gains in volatile commodities prices, but analysts said domestic underlying inflationary pressures were increasing and the case for one or more ECB interest rate hikes within months had been strengthened.
"The case for record low interest rates is getting weaker," said Berenberg Bank economist Holger Schmieding, who expects two rate hikes of 25 basis points each in September and December.
Apart from further rises in costs of heating oil and fuels as well as fruits and vegetables, Germany's Federal Statistics Office said January's increase was also due to a national hike in electricity bills to subsidize renewable energy producers.
"Inflation is back in Germany," said UniCredit economist Alexander Koch, who warned of upward pressure on the core inflation rate throughout 2011.
"The recent strong rise in corporate input prices and also selling price expectations signal a clear upward trend in underlying inflation," he said.
Adding to the more hawkish tone, ECB policymaker Lorenzo Bini Smaghi said earlier on Thursday that rises in imported goods prices carried an inflation risk for the euro area, pushing up the single currency and Bund yields.
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To see a graphic on German inflation, please click on the link - http://r.reuters.com/zyb77r
To read a story on wage pressures in Germany, click on
To read an interview with a chief German economic policy advisor speaking on inflation, click on
To read an interview with the head of Germany's trade body BGA on inflation, click on
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POLICY DILEMMA
Germany's HICP accounts for just over a quarter of the weighting for the euro zone-wide data that defines price stability under ECB policy, and inflation there has in the past undercut the euro zone average.
January's figure fractionally surpasses the ECB's target rate for the euro area of close to, but below, 2 percent and causes a dilemma for policymakers worried about possible recessions in countries like Greece, Ireland and Portugal.
Berenberg Bank's Schmieding also pointed to a monthly European Commission survey published on Thursday that showed a rise in euro zone consumer inflation expectations for the rest of this year.
The forward-looking index jumped 38 percent in the space of just one month, driven by an even steeper rise in Germany.
"The magnitude of the move is significant, even if the index for the euro area overall is still only marginally above the long term average," he explained.
German workers at Volkswagen demanded a greater share of corporate profits, calling for six percent more pay over the next 12 months alone.
Economists see these demands as a sign that Germany's manufacturing industry is starting to overheat, as overflowing order books, rising commodities prices and a tightening labour market all point towards a build-up in supply constraints.
Even when factoring in the depressed inflation rates from ailing euro zone states, Germany's above-trend growth has led one economic advisor to Chancellor Angela Merkel to predict inflation could reach 3-4 percent in the next two years for countries using the single currency.
Germany's HICP has never risen above the 3.5 percent registered in July 2008. At that rate, consumers would have to pay twice as much to buy the exact same goods after just 20 years.
"If there is any euro zone country where the risk of second-round effects from energy and food prices is imminent, then it is Germany," said Carsten Brzeski, economist at ING, said on Thursday.
"After ten years of wage moderation, strong economic growth, dropping unemployment and employment growth lead to stronger wage growth this year, increasing the headache of policymakers in Frankfurt."
(Reporting by Christiaan Hetzner; Editing by John Stonestreet, Toby Chopra)