LONDON (ShareCast) - Eurozone inflation declined in March to its lowest level since August 2010 driven by falling energy prices, according to data from Eurostat Tuesday.
Annual inflation in the 17-nation bloc dropped to 1.7% last month, compared with the European Central Bank's target of around 2.0%, the European Union's statistics agency - Eurostat - said.
An easing of inflationary pressures and a weak economy could spur European banks to consider lowering rates at a meeting on May 2nd.
Economists have said the bloc's unwavering inflation target may hamper a return to economic expansion after three years of debt crisis.
ECB policymakers have suggested that lower price pressures may push them to ease monetary policy further.
"We expect the ECB to cut interest rates from 0.75 percent to 0.50 percent by mid-2013, and consider a move as soon as May as highly possible," economist Howard Archer of IHS Global Insight told Reuters.
"Not only did further euro zone GDP contraction highly likely occur in the first quarter, but prospects for the second quarter hardly look bright at the moment."
The ECB last reduced its main refinancing rates on July 2012 to the current 0.75% level.