Annual eurozone inflation fell to a more-than four-year low in March increasing the pressure on the European Central Bank to act to head off fears of deflation.

The region’s cost of living slumped to 0.5 per cent in March compared with 0.7 per cent in February, the European Statistics Office Eurostat said.

This took consumer prices deeper into what ECB chief Mario Draghi has called the “danger zone” of an inflation rate below 1 per cent.

Inflation is now at its lowest level since November 2009.

Analysts had predicted the March’s inflation rate would come in at 0.6 per cent.

But they also said the March drop largely reflected Easter falling in March last year, rather than April, which in turn pushed down prices for seasonal goods and services, such as holidays.

Still, the data is likely to renew market speculation that the ECB might be forced to loosen monetary policy again possibly as early as its meeting this week.

“Deflation dangers clearly remain,” said Ben May European economist with Capital Economics research group.

“In all, then, we still think that it is only a matter of time before the (ECB) governing council will conclude that it needs to take further policy action to prevent a worsening of the medium-term inflation outlook,” he said.

Consumer prices in the 18-member eurozone are also now well under the ECB’s annual inflation target of below but close to 2 per cent.

The ECB last trimmed rates in November when it cut its benchmark refinancing rate by 0.25 basis points to 0.25 per cent.

The Frankfurt-based ECB expects inflation to average 1 per cent this year before accelerating in the next two years to stand at 1.7 per cent by the end of 2016.

However, Draghi has said the bank was prepared to act again if there were further signs of a deterioration in the currency bloc’s inflation outlook.

In addition to cutting borrowing costs, this could include the ECB launching a policy of quantitative easing aimed at pumping money into the fragile eurozone economy.

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