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"We think the ECB could bring rates as low as 0.5 percent in March"
- Fabio Fois, an economist at Barclay's Capital
Eurozone inflation eased more than expected in December, giving the European Central Bank more room to lower borrowing costs as the economy heads toward a recession.
The inflation rate in the 17 countries that use the euro fell to 2.7 per cent, said the European Union's statistics office on Tuesday.
"The pressure is abating although the risks from energy are still there," said Fabio Fois, an economist at Barclay's Capital. "We think the ECB could bring rates as low as 0.5 percent in March."
"We expect euro-zone consumer price inflation to be back below 2% before mid-2012," said Howard Archer, chief euro zone and U.K. economist at IHS Global Insight. He also believes the ECB will cut key interest rate 0.25 per cent to 0.75 per cent in the first quarter 2012.
"We believe that, with the ECB feeling [relatively] at ease about inflation prospects over the medium term, it will cut the rate down to 0.50 percent," said Gustavo Bagattini, European economist at RBC Capital Markets.