Euro zone inflation slowed in December as expected, data showed on Wednesday, underlining market expectations that price growth will decelerate further in the first months of 2012 and create room for more interest rate cuts to help the weakening economy.
The European Union's Statistics Office (Eurostat) estimated that consumer prices in the 17 countries sharing the euro rose 2.8 percent year-on-year in December, down from 3.0 percent year-on-year rises in November, October and September.
The European Central Bank cut its main interest rate back to a record low of 1 percent on December 8 to try to boost the economy as inflation pressures subside.
Many economists say inflation peaked at 3 percent and should fall back below 2 percent -- the ECB's medium-term target -- around April, as the economy heads into a prolonged downturn.
Euro zone GDP grew just 0.2 percent in the third quarter and economists expect that it contracted in the fourth. They also think it might contract in the first three months of 2012, which would send the bloc back into recession after a two-year recovery from the worst global financial crisis since the 1930s.
(Reporting By Jan Strupczewski. Editing by Sebastian Moffett.)