By Michael Nienaber and Paul Day
BERLIN/MADRID (Reuters) - German and Spanish consumer inflation slowed more sharply than expected in March as oil prices slumped, data showed on Thursday, offering some respite to the European Central Bank as it faces pressure to wind down its monetary stimulus.
The ECB has slashed interest rates into negative territory and adopted a bond-buying program worth 2.3 trillion euros ($2.5 trillion) to counter the threat of deflation and revive growth in the 19-member currency bloc.
Euro zone inflation surged to a four-year high in February, zooming past the ECB's price stability target of just under 2 percent. But the central bank has said it first needs to see if inflation rises at the start of the year are sustainable in the medium term before considering changing policies.
German annual inflation, harmonized to compare with other European countries (HICP), slowed to 1.5 percent in March after reaching a 4-1/2 year high of 2.2 percent in February, preliminary data from the Federal Statistics Office showed.
The March reading marked the first slowdown in nearly a year and came in weaker than a Reuters consensus forecast of 1.9 percent. It pushed down Germany's 10-year government bond yield to a three-week low of 0.32 percent.
ING bank economist Carsten Brzeski said the drop should help the ECB in taming "rate hike fantasies", adding that falling oil prices and limited domestic inflationary pressures should lead to a gradual slowing of headline inflation in the second half of the year.
"Speculation about changes to the ECB's monetary policy stance are the result of a strengthening macro outlook and higher headline inflation," he noted.
"Nevertheless, the ECB, in our view, is not likely to quickly change policies - clearly not before the French presidential elections (in April and May)," Brzeski added.
Several ECB policymakers argued on Thursday that the bank needed to stick to its already laid out policy path, though a top conservative urged them to leave the door open to a more rapid reduction in stimulus.
After the French elections, the ECB could give its first hints at a 2018 tapering of the bond-buying program, Brzeski said.
Spanish consumer price inflation also eased sharply in March as fuel and power prices fell.
The EU-harmonized inflation rate there slowed to 2.1 percent, flash data from the National Statistics Institute (INE) showed. This compared with a Reuters poll of 2.7 percent and with a reading of 3.0 percent in February.
"This is much lower than we'd expected and is principally due to the effect of oil prices," said Estefania Ponte, analyst at BNP Paribas (PA:BNPP) Personal Investors in Madrid.
In Germany, Europe's biggest economy, energy prices and food costs rose less sharply than in February although both again were the main drivers behind the overall increase, a breakdown of the non-harmonized data showed.
Economists partly put down the drop in German headline inflation also to calendar effects, since last year's Easter holidays came in March rather than, as this year, in April. This means some items such package holiday costs rose less sharply this March.
The inflation rate for the entire euro zone, due on Friday, is expected to have fallen to 1.8 percent in March from 2.0 percent in February, economists polled by Reuters said.