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German inflation subdued, makes ECB rate cut more likely

German inflation subdued, makes ECB rate cut more likely
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In April, inflation in Germany slowed to its lowest level in two and a half years.

The cost of living in Europe’s largest economy increased by 1.2 percent from April last year. That was according to the first calculations from the government statistics office using data for six of Germany’s 16 federal states.

From March, the consumer price index was down by 0.5 percent.

Final German inflation data for April are due to be released on May 14.

The figures, which were better than economists had predicted, mean the European Central Bank has more leeway to cut interest rates at its next meeting on Thursday to stimulate the eurozone economy.

The ECB targets inflation of just below 2.0 percent for the eurozone as a whole.

However a rate cut is by no means certain and indeed some investors
have begun to reconsider the idea.

“Last week it was all go, go go – everyone was factoring in a rate cut,” said Sarah Hewin, senior economist at Standard Chartered Bank. “There’s a bit of a reconsideration now, and a look at the reasons why the ECB may decide just to make no move.”

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