Inflation in the euro zone cooled at a faster-than-expected pace in September and fell its lowest level since February 2010, signalling that the European Central Bank can maintain its loose monetary policy to help the bloc’s recovery. Consumer prices in the 17 countries using the euro edged down to 1.1 per cent in September from 1.3 per cent in August, slightly below market expectations of 1.2 per cent, the EU’s statistics office Eurostat said on Monday. The European Central Bank will hold its rate setting meeting in Paris on Wednesday and is expected to keep rates at a record low and keep them that way for an extended period of time, or possibly deliver another cut if warranted. September’s fall was mainly due to energy prices, which slid 0.9 per cent on the year, while rises in the price of food, alcohol and tobacco products slowed significantly to 2.6 per cent from 3.2 per cent in August. The bloc’s weaker economies, struggling with record joblessness and growth-choking austerity, have seen a big drop in the rate of inflation this year, while Greece is facing deflation. In Spain, consumer prices fell to their 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. In Germany, Europe’s largest economy, inflation decelerated to 1.4 per cent in September, staying comfortably below the ECB’s target of close but below 2 per cent and posed no risks to the bank’s expansive monetary policy.

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