Euro zone consumer prices fell in January at their fastest ever pace on a monthly basis, dragged down by a slump in the cost of non-energy industrial goods, keeping annual inflation well below the European Central Bank’s target.

Inflation rate in the 18 countries sharing the euro dropped by 1.1 per cent in January when compared with December, keeping the annual inflation rate at 0.8 per cent for a second month in a row, the EU’s statistics office Eurostat said.

The annual inflation rate was revised from 0.7 per cent, which Eurostat released in a flash estimate on January 31st.

The annual rate was influenced by a 1.2 per cent decline in the highly volatile prices of energy, while the monthly decline was hit by a 3.9 pe rcent fall in prices of non-energy industrial goods and a 0.4 per cent drop in the price of services.

The ECB, which cut its key interest rate to a record low of 0.25 per cent in November, is expected to stay put until mid-2015 unless money market rates rise and the euro strengthens.

In January, euro zone members Greece and Cyprus were stuck in deflation. Only three countries in the region, Estonia, Latvia and Slovakia, saw consumer prices rising month-on-month in January. Italy, the euro zone’s third largest economy, showed a 2.1 per cent month-on-month decline, the biggest drop from among all euro zone members.

In Germany, Europe’s largest economy, consumer prices fell by 0.7 per cent on the month, keeping the annual inflation rate steady at 1.2 per cent, with both figures coming below expectations.

Eurostat will publish the euro zone’s February inflation flash estimate on Friday.

Reuters