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German state data point to slump in inflation

Published 11/26/2008, 04:53 AM
Updated 11/26/2008, 04:56 AM

BERLIN, Nov 26 (Reuters) - German inflation likely slowed for a fourth month running in November as fuel costs fell, pointing to easing price pressures in the broader euro zone, state data showed on Wednesday.

Annual inflation in North Rhine-Westphalia (NRW), Germany's most populous state, slowed to 1.1 percent from 2.3 percent in October, figures from the state's statistics office showed.

Data from German states often provide the first insight into inflation trends across the euro zone. NRW accounts for nearly a quarter of Germany's price index, which itself makes up close to 30 percent of the overall gauge for the single currency area.

Other German state data also pointed to easing price pressures. In Hesse, inflation slowed to 1.0 percent in November from 2.0 percent in October, and in Brandenburg it eased to 1.2 percent from 2.2 percent.

If the figures from the three states are mirrored across Germany it could encourage the European Central Bank to loosen borrowing costs further to counter the threat of a lasting economic downturn. The ECB next meets on Dec. 4.

In comments published on Wednesday, ECB Governing Council member Ewald Nowotny told Japan's Nikkei newspaper that receding worries about inflation have made room for another ECB rate cut.

A Reuters poll forecast Germany's national gauge of consumer prices (CPI), due to be published on Wednesday, would dip by 0.3 percent on the month, with the annual inflation rate expected to slow to 1.6 percent from 2.4 percent in October.

The EU-harmonised price index (HICP) was seen falling by 0.3 percent on the month. Prices were tipped to rise 1.7 percent on the year -- down from 2.5 percent in the previous month.

Another Reuters poll pointed to euro zone inflation, due on Friday, slowing to 2.4 percent in November from 3.2 percent in October.

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