German inflation unchanged in February, remains below ECB target

BERLIN (Reuters) - German annual inflation remained below the European Central Bank's target level for a third month running in February, data showed on Thursday, suggesting that price pressures in Europe's biggest economy are still moderate despite low interest rates.

German consumer prices, harmonized to make them comparable with inflation data from other European Union countries, rose by 1.7 percent year-on-year, the Federal Statistics Office said.

The ECB targets inflation of close to but below 2 percent for the euro zone as a whole.

Joerg Zeuner, economist at KfW bank, said the inflation rate should be weaker next month due partly to lower energy prices and a slowing economy, which is facing headwinds from trade hostilities that are weighing on export-dependent manufacturers.

"This pleases consumers and, at the same time, makes the ECB ponder," Zeuner said in a note. "However, the central bank will make its verdict mainly dependent on the economy. And here, it is unlikely to completely ignore the weak figures, particularly from manufacturing."

Growth in Germany stalled in the second half of last year, and concern is growing that the slowdown may not be short-lived and potentially become a drag for the whole euro zone.

With growth weakening, markets have pushed their rate hike expectations into the second half of 2020.

The ECB at the moment guides markets for steady rates through the summer, or as long as is necessary to lift inflation back to its target of almost 2 percent.

On the month, EU-harmonized prices rose by 0.5 percent, the preliminary numbers showed.

(Reporting by Michael Nienaber and Joseph Nasr; editing by Thomas Seythal and Michelle Martin)

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