Berlin  - European inflation fell below the European Central Bank's (ECB) 2 per cent target in December, data to be released Tuesday is forecast to show, raising the prospects of the ECB delivering another cut in rates at its meeting set for next week.

Preliminary data to be released by the European Union's statistics office will show December inflation in what was then the 15-member eurozone sliding from 2.1 per cent in November to 1.8 per cent last month, analysts say.

The eurozone expanded its membership to 16 on January 1 when Slovakia adopted the euro as its national currency.

The ECB has been sending out a cautious message about what markets should expect from next week's meeting of its now 22-head rate-setting council.

But with eurozone economic growth rapidly losing momentum and the ECB having set an annual inflation target of close to but below 2 per cent, many economists believe that the Frankfurt-based bank will be forced to follow up last month's historic 75-basis-points with another big reduction next week.

Faced with signs of a dramatic weakening of the eurozone economy, the ECB has trimmed borrowing costs in the currency bloc by 175 basis points since October.

Last month's 75-basis-points reduction was the biggest rate cut since the notoriously cautious ECB took charge of eurozone monetary policy about ten years ago and brought borrowing costs in the currency bloc down to 2.5 per cent.

The release of the preliminary eurozone inflation is likely to be accompanied by the publication this week of another round of bleak European economic data with unemployment in Germany expected to rise and production and factory order books tipped to contract again.

At the same time, a closely watched European Commission economic sentiment survey to be released Thursday is forecast to underscore the deepening sense of economic gloom in the eurozone by sliding again as the end of 2008 drew to a close. (dpa)