Euro zone inflation plunged this month to its lowest in almost 10 years, boosting pressure on the ECB to cut interest rates further as price growth is now well below its target.
European Union statistics office Eurostat estimated that consumer prices in the 16 countries using the euro rose 1.1% year-on-year in January, a level last seen in July 1999, down from 1.6% in December and 2.1% in November.
The Eurostat estimate does not contain monthly numbers or any detailed data, but economists said the sharp drop stemmed from a steep fall in oil prices against the same period of 2008.
The ECB wants to keep inflation below, but close to 2%and several members of its rate-setting council have expressed concern that inflation should not fall too far below the target. They have dismissed, however, any risk of deflation.
Having cut interest rates by a total of 225 percentage points since October to 2%, the bank has signalled it will pause in February and consider further cuts in March.
However, some economists said the data increased the chances that the ECB would cut rates in February, despite suggestions of a pause.
Many economists expect the ECB to reduce borrowing costs to around 1% by mid-year, when inflation is likely to be negative because of a strong drop in oil prices.
Euro zone unemployment rises to 8%
Meanwhile, euro zone unemployment rose in December to the highest level in more than two years, official EU data showed today.
Some 230,000 people lost their jobs in December, driving the unemployment rate up to 8%, according to a first estimate by Eurostat.
The December figures mark the ninth consecutive monthly increase in unemployment.
Eurostat estimated that 17.91 million workers were without a job in December throughout the EU, including 12.47 million in the euro zone, whose ranks swelled to 16 members on January 1 when Slovakia adopted the euro.
The December unemployment rate, the highest since November 2006, is up from 7.9% in November 2008 and 7.2% in December 2007, Eurostat said.
The record low of 7.2% in unemployment in the euro zone was reached in March.
The European Commission forecast earlier this month that the euro zone jobless rate would hit 10.2 % in 2010, topping the 10% mark for the first time since 1998.
In the face of slumping demand for their products and services, European companies have been cutting thousands of jobs.
