German inflation down, door open for ECB rate cut

German inflation fell to 1.1 percent in April, easing way for possible ECB rate cut

Associated Press

FRANKFURT, Germany (AP) -- The European Central Bank has a freer hand to cut its key interest rate now that official figures show German inflation dropped to an annual 1.1 percent in April.

The ECB tries to achieve an inflation rate of just under 2 percent for the 17 European Union countries that use the euro. Low inflation in the eurozone's biggest economy gives the ECB a stronger case if it chooses to cut its key rate Thursday from a record low of 0.75 percent to stimulate the economy.

Rate cuts can worsen inflation if done at the wrong time — but Monday's figures suggest inflation is little threat right now.

Many economists think the bank is increasingly ready to cut its key rate because of signs the economy is not recovering from recession.

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