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Eurozone inflation fell sharply to 2.2 per cent in August, bolstering expectations that the European Central Bank will reduce interest rates next month.
Friday’s figure was in line with a forecast of 2.2 per cent in a Reuters poll and last month’s rate of 2.6 per cent.
It came after Germany and Spain reported bigger than expected reductions in August in figures this week.
France also reported a fall in inflation, though less than expected, earlier on Friday.
Markets are betting on a quarter-point reduction in the ECB’s benchmark interest rate to 3.5 per cent at its September 12 meeting, as inflation nears the bank’s 2 per cent target.
The ECB already cut rates by a quarter point in June, while the Bank of England did so this month.
The US Federal Reserve is expected to cut its benchmark rate for the first time in more than four years in September.
ECB chief economist Philip Lane signalled this month that further rate reductions were likely in Europe.
He warned that keeping interest rates “too high for too long would deliver chronically below-target inflation over the medium term”, while warning that a return to the ECB’s 2 per cent target was not yet certain.
Isabel Schnabel, an ECB executive board member, indicated on Friday she was also open to cuts, but said that the central bank “should proceed gradually and cautiously” on lowering rates.
