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German Inflation Slowed to 2.4% in May as Energy Costs Declined

June 10 (Bloomberg) -- Inflation in Germany, Europe’s largest economy, slowed in May after energy costs retreated.

The inflation rate, calculated using a harmonized European Union method, dropped to 2.4 percent from 2.7 percent in April, the Federal Statistics Office in Wiesbaden said today, confirming its first estimate published May 27. From April, consumer prices declined 0.2 percent.

Oil prices dropped 10 percent in May after breaching $114 a barrel in April. European Central Bank President Jean-Claude Trichet signaled yesterday the bank is ready to raise borrowing costs next month to curb price pressures after keeping the benchmark interest rate at 1.25 percent, even as peripheral nations such as Greece, Portugal and Ireland remain mired in a sovereign-debt crisis.

“Inflation still has room to rise,” said Joerg Lueschow, an economist at WestLB AG in Dusseldorf. “We should pass the highpoint in the summer months. After that, price pressures should ease, but German inflation will probably stay above 2 percent next year and give the ECB reason to hit the brake.”

On a non-harmonized basis, inflation eased to 2.3 percent in May from 2.4 percent in April and consumer prices were unchanged in the month, the statistics office said. Wholesale prices, which were also flat in the month, gained 8.9 percent from a year earlier, the statistics office said in a separate release.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net.

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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