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German inflation edges closer to ECB target in June, state data show

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German inflation edges closer to ECB target in June, state data show
FILE PHOTO: People carry their shopping bags in downtown Hamburg, Germany, January 25, 2018. REUTERS/Fabian Bimmer   -   Copyright  Fabian Bimmer(Reuters)
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BERLIN (Reuters) – Inflation edged closer to the European Central Bank’s target in German states in June, data showed on Thursday, but analysts said the figures are unlikely to prompt a reversal of its decision not to raise interest rates in the coming year.

The ECB aims to keep inflation in the euro zone close to, but just below, 2% a year. Earlier this month, it opened the door to cutting rates or buying more bonds, as risk factors such as trade wars dragged down the euro zone economy.

“The ECB is not going to focus on just one number, even if that number is from Germany,” said Jack Allen-Reynolds of Capital Economics. “Economic growth in the euro zone is pretty weak and underlying inflation remains subdued. The ECB has been preparing the markets for more stimulus and those numbers are not going to make it change its mind.”

A poll conducted before the release of the regional data suggested German consumer price inflation, harmonized to compare with data from other European Union countries, would remain unchanged at 1.3%.

The state data suggested that the nationwide preliminary inflation figures due at 1200 GMT might confound the forecast.

In North Rhine-Westphalia, Germany’s most populous state, inflation accelerated to 1.7% from 1.6%. In Bavaria, consumer prices rose by 1.8% after a 1.6% increase in May.

The state inflation readings, which are not harmonised to compare with other countries, feed into nationwide figures.

Economists expect euro zone inflation — due on June 28 — remained at 1.2% in June.

(Reporting by Joseph Nasr, editing by Larry King)

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