Euro zone consumer prices fell 0.1 per cent in July in line with economists' expectations, pushing the zone’s annual inflation rate down to 2.8 per cent from 3 per cent in June, Eurostat said today.
It was the second consecutive month inflation moved closer to the European Central Bank's 2 per cent ceiling from May's eight-year high of 3.4 per cent and the data came less than two weeks before the ECB meets to set interest rates.
Speculation has grown in financial markets that moderating inflation could give the ECB leeway to cut its key rate from 4.5 per cent as early as its August 30th meeting to offset economic slowdown in the euro zone.
Some of the biggest monthly declines were seen in energy prices and in the cost of clothing and transport, which together account for nearly a third of the weighting.
Core inflation, which strips out energy, food, alcohol, and tobacco prices, rose 0.1 per cent in July and 2 per cent from a year earlier.
The Dutch inflation rate was the highest in both the euro zone and the 15-nation European Union, coming in at 5.2 per cent in July. France posted the lowest inflation rate in the euro zone, at 2.2 per cent, but Britain was even lower at 1.4 per cent.
The inflation rate fell in 11 of the 15 European Union countries, pushing the EU rate down to 2.6 per cent from 2.8 per cent in June.
On an EU-harmonised basis, Irish prices were down 0.3 per cent in July and up 1 per cent in the three months since April 2001.