June 28, 2018 / 9:54 AM / in 9 months

Inflation in parts of Germany holds above ECB target in June

BERLIN, June 28 (Reuters) - Inflation in some German regions held this month above the target rate set by the European Central Bank, data showed on Thursday, pointing to robust consumer demand and supporting the ECB’s decision to shut its bond purchase scheme in December.

With inflation firming in the euro zone, the ECB said earlier this month it would end its crisis-era bond buying programme - originally designed to ward off deflation and stimulate the economy - but signalled that any interest rate rise remains distant.

The decision reflected uncertainties hanging over the euro zone economy, including trade tensions between the United States, the European Union and China.

Annual inflation in Germany’s most populous state, North Rhine-Westphalia, was already above the ECB’s price target of just below 2 percent. The rate remained at 2.1 percent in June from May, the data showed, mainly driven by higher energy, food and transport prices.

In Bavaria, annual inflation rose to 2.4 percent from 2.3 percent and the rates in the states of Baden-Wuerttemberg, Brandenburg and Saxony were also above the ECB target.

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 ease to 2.1 percent in June from 2.2 percent last month.

In a sign of rising inflation in the euro zone, Spanish consumer prices increased in June at their fastest pace since April 2017, also topping the ECB’s target level.

The euro zone will publish preliminary June inflation data on Friday, with the annual rate expected to rise to 2.0 percent from 1.9 percent in May, according to a Reuters poll. (Reporting by Joseph Nasr; editing by David Stamp)

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