The ECB should abandon targeting headline inflation and focus instead on price growth in discretionary spending to protect the bloc's poorest, a paper to be presented to policymakers at the bank's preeminent research conference argued on Friday.

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.