The producer price index was up 2.6 percent in October compared to the same month a year ago. Consumer inflation in the euro zone, which has been well above the ECB's target of just below 2 percent for more than a year, fell sharply in November to 2.2 percent. That cooling in inflation pressures suggests ECB policymakers have room to help the euro zone's economy that slipped into recession in the third quarter of this year, by lowering the cost of borrowing for families and businesses.
ECB policymakers kept rates at a record low of 0.75 percent in November and are expected to keep rates unchanged again this week, but expectations are rising of a rate cut early next year. "We do not expect a rate change on Thursday, although the decision is unlikely to be unanimous and some Governing Council members will probably favour a 25 basis point cut," said Mario Valli, chief euro zone economist at UniCredit. The ECB sees current monetary policy as "very accommodative" but the bank has also shifted its language, playing down hopes for an economic recovery any time soon, while many economists see the recession continuing in 2013.