Page last updated at 10:36 GMT, Thursday, 15 January 2009

Euro inflation hits 26-month low

Petrol pump
Petrol and other energy bills fell sharply in December

Eurozone inflation fell to a 26-month low in December, thanks to a big decline in the price of energy bills, official figures have shown.

Inflation in the 15 countries that were using the euro in December - before Slovakia joined this month - fell to an annual rate of 1.6%.

This compares with 2.1% in November, and came after energy bills, including the price of petrol, fell 3.7%.

The data comes as the European Central Bank is expected to cut interest rates.

Widely tipped

The ECB is widely tipped to trim rates by at least half a percentage point from the current 2.5% when it announces its January decision later.

Analysts said the latest fall in inflation was expected, giving the ECB room to cut rates further and help lift the economy without fear of lifting prices.

"The ECB will do 50 basis points today and we think rates will go down to 1% in the second quarter," said Stephane Deo of UBS Bank.

Excluding energy and food bills, core eurozone inflation declined to 1.8% in December from 1.9% in November.

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