Consumer inflation in Germany held above the European Central Bank's target in June, data showed today, and the bank's head all but sealed an interest rate rise next week to tame euro zone price pressures.

Inflation in Europe's dominant economy came in at 2.3 per cent year-on-year, unchanged from May, and prices rose 0.1 per cent on the month, in line with forecasts in Reuters survey.

In Amsterdam, ECB president Jean-Claude Trichet reiterated that the bank was in "strong vigilance mode" over price pressures, a phrase deployed regularly to signal a rate hike at the next monthly meeting.

The euro rose in response.

The ECB's inflation target is close to but below 2 per cent.

The German data give a strong steer on the direction of inflation in the broader 17-nation euro zone, which was running at 2.7 per cent in May and is expected to have edged a little higher this month.

Consumer prices in Germany's most populous state of North Rhine-Westphalia rose 2.5 per cent year-on-year and 0.2 per cent month-on-month. In May, prices had fallen by 0.1 per cent from April and risen by an annual 2.3 per cent.

Year-on-year inflation also rose in Hesse, to 2.1 per cent from 2.0 per cent in May, and in Baden-Wuerrtemberg to 2.3 per cent from 2.2 per cent. Inflation was unchanged in Saxony, Brandenburg and Bavaria.

"It looks like upward pressure on prices is easing. Inflation in Germany seems likely to be stabilising at around 2.3 percent," said Stephan Rieke at BHF Bank.

"Inflation might rise to perhaps 2.5 per cent in July but after that things should calm down."

Mr Trichet used the "strong vigilance" codewords at the ECB's last policy meeting earlier this month and the same term was used by executive board member Juergen Stark yesterday.

Reuters