By Dave Graham
BERLIN, Feb 26 (Reuters) - German price pressures were likely stronger than expected in February, but overall inflationary developments in the euro area remain tame enough to allow the European Central Bank to cut interest rates next week.
Consumer prices in six German states rose by between 0.5 percent and 0.7 percent in February, outstripping a Reuters poll forecast for a 0.4 percent rise in the country as a whole.
The price figures from German states offered the first insight into trends across the 16-nation euro area, where inflation was expected to ease this month to 1.0 percent from an estimated 1.1 percent in January, a Reuters poll showed.
Alexander Koch, an economist at UniCredit, said though inflation would likely prove more resilient than expected in February, the ECB would still cut rates next Thursday.
"This won't stop them," he said. "We should see the bank reduce its main rate by 50 basis points to 1.5 percent. The trend of slowing inflation has not been broken. By the middle of the year the ECB will have cut rates to around one percent."
The ECB's main lending rate is currently set at 2.0 percent and a preliminary Reuters poll forecast that the bank will cut to a record low of 1.5 percent on March 5.
The Federal Statistics Office said it would issue an initial inflation estimate for Germany on Friday morning.
Germany's index of consumer prices (CPI) was expected to rise by 0.4 percent this month. Year-on-year, CPI was seen up 0.8 percent after a gain of 0.9 percent in January.
A national estimate had been expected on Thursday, but four states had to revise their figures after an error by the Statistics Office caused them to miscalculate their data. The earlier data had pointed to a slowdown in German inflation.
Germany's EU-harmonised price index (HICP) was predicted to show a 0.3 percent month-on-month rise, with annual inflation forecast to ease by 0.2 percentage points to 0.7 percent.
Gottfried Steindl, an economist at RZB Wien, said the big question facing the market now was whether the ECB would opt to reduce rates below one percent to combat the recession.
"I don't think the ECB has consensus on that yet," he said.
ECB Governing Council member Axel Weber said this week the bank should not cut its rates below one percent.
Europe is battling recession and Germany, its biggest economy, is expected to suffer a contraction this year that dwarfs any other it has experienced since World War Two.
A breakdown of the states data showed that seasonal goods and package holidays became dearer in February. By contrast, the cost of oil-based products was down sharply.
(Additional reporting by Paul Carrel, Madeline Chambers, Cirsten Pahlke and Kerstin Gehmlich; Editing by Victoria Main)