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German inflation bounces back in June

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Frankfurt am Main (AFP)

Inflation in eurozone powerhouse economy Germany rebounded slightly in June, official data showed Thursday, as the European Central Bank weighs up whether to pump more stimulus into the single currency bloc.

Prices were 1.6 percent higher this month than a year ago, federal statistics authority Destatis said in a preliminary reading, picking up the pace by 0.2 points compared with May.

The result was higher than predicted by analysts surveyed by Factset, who had expected inflation flat compared with May, at 1.4 percent.

Looking to different elements of the inflation index, goods and energy prices grew slower in June than in May, while costs for food and services rose faster.

Part of the higher services cost was down to pricier package holidays, subject to sharp fluctuations in the months around the Easter holiday, which fell unusually late this year.

Meanwhile inflation fell out lower, at 1.3 percent, when measured using the ECB's preferred yardstick, the Harmonised Index of Consumer Prices (HICP).

That is well short of the Frankfurt institution's target of price growth of just below 2.0 percent across the 19-nation eurozone.

ECB policymakers are weighing whether to prop up the eurozone with new monetary stimulus, in the form of slashing interest rates from their historic lows or even reactivating the central bank's 2.6-trillion-euro ($3.0 trillion) "quantitative easing" (QE) bond-buying scheme.

"If inflation is not even picking up in Germany, with a strong labour market and an economic expansion of 10 years, where else in the eurozone should it pick up?" asked economist Carsten Brzeski of ING bank.

Looking ahead, lower oil prices and weaker growth especially in industry should ease upward pressure on inflation, said analyst Sebastian Wanke of public investment bank KfW.

"For the ECB, this all means: more easing ahead, probably," Wanke judged.

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