August 29, 2019 / 9:11 AM / 25 days ago

German state data points to inflation slowing in August

BERLIN, Aug 29 (Reuters) - German inflation likely slowed in August from the prior month, state data indicated on Thursday, sliding further below the European Central Bank’s target ahead of its Sept. 12 policy meeting at which fresh stimulus is expected.

Annual inflation in six German states slowed in August from a month earlier, the data showed, with the rate in North Rhine-Westphalia, the country’s most populous region, dipping to 1.5 percent from 1.7 percent in July.

The ECB targets inflation of close to but below 2 percent.

Pan-German inflation data for August is due at 1200 GMT.

The ECB has all but promised a stimulus package for its Sept. 12 policy meeting and market expectations have been growing. Investors are already pricing in several rate cuts for the coming year and a fresh round of bond purchases, commonly known as quantitative easing.

ECB Vice President Luis de Guindos said on Tuesday the bank must be critical of market expectations for its future policy moves, basing its decision on economic data rather than financial market prices.

The German economy, Europe’s largest, contracted on weaker exports in the second quarter, highlighting its Achilles heel due to escalating global trade disputes and waning foreign demand.

German business sentiment also deteriorated more than anticipated in August to hit its lowest in nearly seven years. The unemployment rate was unchanged at 5.0 percent in August, data released on Thursday showed.

Writing by Paul Carrel Editing by Mark Heinrich

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