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UPDATE 1-VAT cut nudges German inflation deeper into negative territory

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BERLIN, Oct 29 (Reuters) - German annual consumer prices fell further in October due a VAT cut as part of the government’s stimulus push to help Europe’s largest economy recover from the coronavirus shock, data showed on Thursday.

German consumer prices, harmonised to make them comparable with inflation data from other European Union countries, fell 0.5% year-on-year after dropping by 0.4% in the previous month, the Federal Statistics Office said.

October’s data compared with a Reuters forecast for a 0.4% decline.

“The inflation rate is influenced, among other things, by the reduction in value-added tax that came into force on 1 July 2020,” the office said in a statement.

On the month, harmonised prices were unchanged, in line with a Reuters poll.

The European Central Bank has a target of keeping inflation close to but below 2% in the euro zone.

The ECB left policy unchanged on Thursday, resisting pressure to unveil more stimulus amid a new wave of the pandemic, but provided the clearest hint yet of fresh easing at its next meeting in December. (Writing by Paul Carrel; Editing by Maria Sheahan and Michelle Adair)