Inflation fell last month in the US and the euro zone on the back of falling energy prices, according to figures published yesterday.

However, inflation in the euro zone without energy and unprocessed food costs, a figure closely watched by the European Central Bank (ECB), crept higher. Economists said the headline inflation slowdown would not change widely-held expectations of an ECB rate rise in December.

In the US, a fall in energy prices helped drive consumer prices down by a more than expected 0.5 per cent in October and, even stripping away volatile food and energy costs, prices were up only 0.1 per cent, according to a Labor Department report yesterday.

US government debt prices were mostly unchanged despite the soft report on consumer prices because investors still believed the Federal Reserve would not cut interest rates in early 2007.

European Union statistics office Eurostat said its headline inflation in the 12 countries using the euro was 0.1 per cent month on month and 1.6 per cent year on year, down from 1.7 per cent in September and in line with market expectations based on a Eurostat estimate from the end of October.

"The ECB will dismiss these low numbers as transitory and simply due to the impact of lower oil prices," said David Brown, chief European economist at Bear Stearns.

The annual inflation slowdown reflected a 0.5 per cent fall in prices of energy, which also dropped 1.8 per cent month on month.