Weak eurozone inflation means ECB interest rates can stay low

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Weak eurozone inflation means ECB interest rates can stay low

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Inflation in the eurozone fell faster than expected in September.

It dipped to its lowest level in three and a half years.

That is good news for the European Central Bank’s plans to keep borrowing costs low for some time in order to stimulate the bloc’s economic recovery.

Inflation in the 17 countries using the euro edged down to 1.1 percent. It had been 1.3 percent in August.

The September reading is well below the ECB’s target of close to but below 2.0 percent.

“We see no inflation risks,” said Christoph Weil, a European economist at Commerzbank. “There is no reason for the European Central Bank to act on inflation. It can stay with its expansionary policy,” he said.

The ECB will hold its rate-setting meeting in Paris on Wednesday and is expected to keep interest rates at a record low.

The region’s weaker economies, struggling with record joblessness and spending cuts, have seen a big drop in the rate of inflation this year, while Greece is facing deflation.

In Spain, consumer price inflation fell to its lowest in almost four years in August on fading effects of last year’s sales tax hike, while other data showed there was no sign of an improvement in the consumer mood.

Even in Germany, Europe’s largest economy, inflation decelerated to 1.4 percent in September.