German inflation unexpectedly falls to 2% in June, hitting ECB's target

• Germany's annual inflation rate unexpectedly eased to 2% in June, preliminary data showed.
• The data brings Europe's largest economy in line with the European Central Bank's target.
• Analysts polled by Reuters had expected a reading of 2.2% in the twelve months to June.

Germany's annual inflation rate unexpectedly eased to 2% in June, bringing Europe's largest economy in line with the European Central Bank's target, preliminary data from statistics office Destatis showed Monday.

Analysts polled by Reuters had expected a reading of 2.2% in the twelve months to June.

The German print is harmonized across the euro zone, allowing for a direct comparison with other single currency states. The consumer price index had eased to 2.1% in the year to May.

Elsewhere in Europe, June inflation readings showed a small rise in the harmonized rate of France and Spain, but no change in Italy.

Franziska Palmas, senior Europe economist at Capital Economics, said the latest inflation data would please the ECB, which is expected to cut rates one more time in this cycle.

“Overall, the figures add to the evidence that inflation in the euro-zone has sustainably returned to the target. Barring a renewed surge in energy prices we expect the headline rate to average 2.0% this year and the ECB to make one final rate cut in September, taking the deposit rate to 1.75%,” she said in emailed comments.

Euro zone inflation data is due on Tuesday, with the headline rate expected to come in at 2% in June, according to analysts polled by Reuters.