German Inflation Down, Door Open for ECB Rate Cut

FRANKFURT, Germany (AP) -- The European Central Bank has a freer hand to cut interest rates 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 reinforce that inflation is little threat right now.

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


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