G ermany's annual inflation rate unexpectedly eased to 2% in June, bringing Europe's largest economy to 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.

Consumer prices in June were 2% higher than the same month last year, up from the 1.9% of May, lifting expectations that policymakers will leave the key interest rate unchanged later this month.

Having cut rates at its June meeting to 2 per cent we think the European Central Bank is now likely to pause in July. With inflation on target in June the latest data offers little reason to think that trajectory has changed.