VIENNA (dpa-AFX) - Eurozone inflation remained unchanged in January, raising expectations for another rate cut from the European Central Bank. Inflation held steady as expected at 2.7 percent, preliminary data from Eurostat showed Wednesday. The breakdown of consumer price figures will be released on February 29. Although inflation slowed from a three-year high seen in November, it stays above the central bank's target of 'below, but close to 2 percent' since December 2010. IHS Global Insight's European Economist Howard Archer forecasts inflation to be back below 2 percent before mid-2012. Retreating inflation over the months ahead will give the ECB ample scope to cut interest rates again should Eurozone economic activity continue to struggle. The European Central Bank left its interest rates unchanged at 1 percent in January, after lowering it in the previous two months. However, Archer does not expect any rate action at the February 9 monetary policy meeting. Nonetheless, he expects rates to be trimmed to 0.75 percent before long with March a very real possibility. EU harmonized inflation in Germany also held steady at 2.3 percent in January. Meanwhile, inflation slowed in Spain to 2 percent from 2.4 percent in December. The results of the Purchasing Managers' survey revealed today that manufacturing downturn eased in January as Germany returned to growth. The manufacturing Purchasing Managers' Index came in at 48.8. The reading was well above December's 46.9 and also above the flash estimate of 48.7. But a reading below the neutral 50 suggests the sector is continuing its contraction. The latest eurozone economic data did nothing to alter the assessment that the region is set for another tough year, even if policymakers implement further measures to help bring the debt crisis to an end, European Economist at Capital Economics, Ben May said. Elsewhere today, the latest bank lending survey from the European Central Bank indicated that euro area banks are set to tighten credit standards in the first quarter, albeit at a slower pace than in the final three months of 2011. For the first quarter of 2012, banks expect a sizeable drop in the net demand for housing loans, while the decline in net demand for consumer credit is expected to remain unchanged.
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