* Data shows 1.5 pct German inflation in July
* Economists had expected slip to 1.4 pct
* Data firms expectations for central bank tightening
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Recasts and writes through)
LONDON, July 28 (Reuters) - Europe's benchmark bond yield approached levels not seen since January 2016 on Friday after data showed higher-than-expected inflation in the bloc's largest economy.
A preliminary reading showed year-on-year inflation at 1.5 percent in July, matching the previous month but beating forecasts of 1.4 percent in a Reuters' poll of economists.
The data confirmed a trend seen earlier on Friday the German states of North Rhine-Westphalia, Bavaria and Baden-Wuerttemberg all reported rising consumer price growth.
More robust inflation supports the view that the European Central Bank may move to scale back some of its massive monetary stimulus later this year.
Euro zone-wide data is due on Monday, with analysts predicting a slight slip to 1.2 percent from 1.3 percent, well below the central bank's near 2 percent price target. Friday's data casts doubt over those forecasts.
"We've also had an upside surprise in Spanish inflation numbers this morning and upbeat French GDP data so the combination is supportive of the ECB moving towards the exit," said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.
Spain earlier on Friday posted 1.7 percent year-on-year inflation in July, a touch above forecasts and last month's 1.6 percent print.
Data on inflation and growth in France -- the bloc's second largest economy -- was bang in line with expectations.
In Germany, North Rhine Westphalia saw annual inflation in July rise to 1.8 percent from 1.6 percent previously while Bavaria's CPI rose to 1.6 percent from 1.4 percent and Baden-Wuerttemberg's to 1.7 percent from 1.6 percent.
Bond yields rose broadly as the German data filtered through, with 10-year yields up 4-5 basis points across the euro zone. German 10-year yields were up 5 basis points at 0.587 percent, approaching levels not seen in 19 months.
Germany's two-year yield -- a key benchmark for the bloc -- rose above six-week lows of minus 0.675 percent hit earlier in the session to as high as minus 0.65 percent.
The euro, which has appreciated nearly 5 percent over the last two months against the dollar, eroding people's spending power and capping price rises, was near a 2-1/2-year high .
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s
(Reporting by John Geddie and Dhara Ranasinghe; Editing by Catherine Evans)