Consumer price figures released by four German regional states have pointed to a slight rise in inflation in Europe's biggest economy in June, easing fears deflation could creep into the euro zone.
Analysts said the German data pointed to a 0.1 per cent or 0.2 per cent month-on-month increase in prices in June and backed Bundesbank claims that a Japan-style, broad-based drop in prices was unlikely.
The data from North Rhine-Westphalia, Hesse, Brandenburg and Saxony, used to compile pan-German prices, came after CPI from 12 key Italian cities suggested prices rose 0.1 per cent in June and annual inflation there steadied at 2.7 percent.
A senior International Monetary Fund official also played down a recent IMF report that sparked fears about deflation in Germany.
"In Germany the study pointed to considerable risks of mild deflation over the next year, as a result of persistent weakness in domestic demand," IMF Deputy Managing Director Eduardo Aninat told an event on Tuesday at the Munich-based Ifo institute.
"Let me underline that we are not forecasting the emergence of a deflationary spiral. What we are saying is policymakers need to be attentive to the risks posed by falling prices. This reinforces arguments for continued monetary accomodation at the current juncture," he said.
The Bundesbank said in its June report, published on Monday, that easing prices were due mainly to temporary factors such as the strong rise of the euro against the dollar, which has made imports, including oil, cheaper.
Analysts said the German data should calm deflation fears.