Euro zone consumer prices were unchanged in August, in line with economists' expectations, driving inflation down to 2.7 per cent from 2.8 per cent in July, Eurostat said today.
It was the third consecutive month the annual inflation rate moved closer to the European Central Bank's self-imposed 2 per cent ceiling. This is welcome news for the bank, which cut rates on Monday with the US Federal Reserve.
The easing was the first time the ECB had moved policy between meetings and came after last week's attacks on US cities that triggered financial market gyrations and concern about global economic prospects.
Analysts said the inflation data backed the ECB's decision to cut rates, particularly given the core annual inflation rate. This rate - which excludes energy, food, alcohol and tobacco costs - stayed at 2 per cent for the second consecutive month.
Earlier, ECB council member Mr Klaus Liebscher said the ECB had eased policy in the expectation of a further decline in inflation risks in the euro zone.
A European Commission spokesman said the institution was sticking to its forecast that the inflation rate would fall below 2 per cent early in 2002 and that the outlook for inflation might even have improved.