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Monday, 5 November, 2001, 15:46 GMT
Eurozone inflation edges lower
European Central Bank headquarters, Frankfurt
Interest rates to move lower at the ECB this week
Average inflation in the eurozone fell to 2.4% last month, down from 2.5% in September, according to figures from the European Union's statistical office Eurostat.

Inflation has now fallen for five consecutive months, giving the European Central Bank greater leeway to cut the cost of borrowing in order to boost the flagging eurozone economy.

The ECB's governing council is due to hold its next rate-setting meeting on Thursday.

The lower inflation figures came as a leading German economist attacked the ECB for underestimating the recessionary risks facing the single currency area.

"Looming recession"

"You can only shake your head at the fact that the ECB left its rates unchanged again at its last meeting [on 25 October]," wrote Hans-Werner Sinn, head of German economic research institute IFO, in Monday's edition of the German daily Handelsblatt.

"Is the economic boom in Ireland or Finland so important that the recession looming in the heart of Europe cannot be fought?"

The ECB has so far this year cut interest rates just three times, to 3.75%, for fear of exacerbating inflationary pressures in high-growth economies on the periphery of the eurozone.

Critics say the bank's reluctance to cut the cost of borrowing has contributed to stagnant growth in the Germany, the economic powerhouse of the single currency area.

They contrast the ECB's inaction unfavourably with the policy of the US Federal Reserve, which has cut rates nine times since February to a 40-year low of just 2.5% in a bid to stave off recession.

Rate cuts seen

Some analysts expect a further cut of half a percentage point when the Fed's open market committee next meets, also on Thursday.

Most forecasters predict that the ECB will cut interest rates this week, citing downbeat growth and unemployment data last month in all the major eurozone economies.

However, others say the bank may leave rates on hold again, pointing out that average eurozone inflation remains above the ECB's ceiling of 2%.

See also:

11 Oct 01 | Business
Eurozone interest rates unchanged
13 Sep 01 | Business
Eurozone growth slows to a crawl
21 Sep 01 | Business
German business confidence falls
23 Jul 01 | Business
German confidence hits five-year low
22 Jun 01 | Business
German business confidence slumps
27 Apr 01 | Business
French economy outshines Germany
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