Euro zone annual inflation slowed in March by far more than the market had expected, driven down mostly by a deceleration of energy price rises, estimates from the European Union statistics office showed today.

Inflation in the 19 countries sharing the euro was 1.5% year-on-year, Eurostat estimated, down from a four-year high of 2% recorded in February.

Economists polled by Reuters had forecast March annualised inflation at 1.8%.

But estimates released yesterday showing a sharper-than-expected slowdown of price hikes in Germany and Spain had prepared markets for a lower figure for the bloc.

Core inflation, which excludes volatile prices of energy and unprocessed food and which the European Central Bank monitors closely, also dropped to 0.7% year-on-year in March from 0.9% in February and below market expectations of an unchanged level.

The core level was the lowest in five months and was last below 0.7% two years ago.

The estimated figures for March offer some respite to the ECB as it faces pressure to wind down its monetary stimulus.

The ECB has slashed interest rates into negative territory and adopted a bond-buying programme worth €2.3 trillion to counter the threat of deflation and revive growth in the 19-member currency bloc.

Overall inflation was lower primarily because energy prices rose by only 7.3% year-on-year from 9.3% in February.

Prices for food, alcohol and tobacco went up by 1.8% in March, from a 2.5% increase recorded the previous month.

In the services sector, the largest in the euro zone economy, prices rose by 1% in March, compared with 1.3% in February.

Eurostat's flash estimate for the month does not include a monthly calculation.