Annual inflation in the eurozone remained at a 16-month low in June, data released Friday showed, with declining price pressures helping to fuel hopes of an early interest rate cut, according to dpa. Eurostat, the European Union's statistics office, said inflation in the 17-member currency bloc held steady at 2.4 per cent for the second consecutive month. The figure was in line with analysts' forecasts. While the preliminary data showed inflation in the eurozone remaining stuck above the European Central Bank's (ECB) 2-per-cent annual target for the 19th month in a row, a growing number of economists expect the Frankfurt-based ECB to move possibly next week to trim rates. "The prospect of moderate inflation allows the ECB room for manoeuvre to cut its main policy rate further," said ING Bank economist Martin van Vliet, adding that he expects the bank to announce on July 6 a 25-basis point cut in its benchmark refinancing rate. This would reduce borrowing costs in the eurozone to below 1 per cent for the first time since the euro was created 13 years ago, and represent another move by the bank to shore up economic confidence in the currency bloc. Friday's announcement by European leaders of new measures to deal with the euro debt crisis are also likely to increase the pressure on the ECB to cut borrowing costs. A rate cut next week would also represent the third time that the bank would have delivered a reduction in borrowing costs since Mario Draghi took over as its president in November. While Eurostat will not release details of the price data until July, analysts believe that a rise in food costs helped to offset the positive impact on inflation of weaker oil prices. They also believe that the marked slowdown underway in the currency bloc's economy will undercut price pressures. "Over the coming months inflation will resume trending downwards," said Clemente De Lucia, an economist at BNP Paribas. "Sluggish economic prospects will limit wage, cost and price pressures over the forecast horizon." Added to this were figures also released Friday by the ECB showing annual credit growth to the companies and households in the eurozone sliding back into negative territory in May and as a result moderate price pressures.
