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German inflation eases in most populous regions

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German inflation eases in most populous regions

German inflation eases in most populous regions
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Fabrizio Bensch(Reuters)
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BERLIN (Reuters) - Inflation in Germany's most populous regions eased in July while remaining above the European Central Bank's target rate, data showed on Monday, supporting the ECB in its cautious approach of winding down its unprecedented monetary stimulus only gradually.

With price pressures building in the euro zone, the ECB said last week that it planned to wrap up its lavish bond purchases by the end of the year. It added, though, that interest rates would remain at record lows through the summer of 2019.

Annual inflation in Germany's most populous state, North Rhine-Westphalia, slowed to 2.0 percent in July from 2.1 percent in the previous month, preliminary data from the regional statistics office showed.

In both Bavaria and Baden-Wuerttemberg, Germany's second- and third-most populous states, inflation fell to 2.2 percent on the year from 2.4 percent in June, the data showed. It remained unchanged at 1.8 percent in Hesse and at 2.2 percent Brandenburg.

Package holiday inflation picked up while prices for clothing fell, regional data showed.

The state inflation readings, which are not harmonised to compare with other euro zone countries, feed into nationwide inflation data due at 1200 GMT.

A Reuters poll conducted before the release of the regional data suggested that Germany's harmonised consumer price inflation (HICP) rate would remain steady at 2.1 percent in July.

But Jennifer McKeown from London-based Capital Economics said the regional data suggested that the pan-German inflation figure would come in weaker than expected.

"These numbers are a bit disappointing. My assumption is that overall German inflation will also ease," McKeown said, adding that core inflation in Europe's biggest economy remained fairly subdued despite robust economic growth.

In Spain, Europe's fourth-biggest economy, EU-harmonised consumer price inflation remained unchanged at 2.3 percent year-on-year in July, flash data from the National Statistics Institute in Madrid showed on Monday.

The euro zone will publish preliminary July inflation data on Tuesday, with the annual rate expected to remain unchanged at 2.0 percent, according to a Reuters poll. The ECB's target is close to but just under 2.0 percent.

(Reporting by Michael Nienaber, editing by Larry King)

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