Eurozone inflation will fall this year to levels not seen since the creation of the 16-country region, Jean-Claude Trichet, European Central Bank president, indicated on Thursday after the bank slashed its main interest rate by a further half percentage point to a historic low.

Jean­Claude Trichet admitted the ECB’s annual inflation rate would be below its 2% target. He blamed the downturn and falling commodity prices

ECB forecasts showed inflation in a range with a mid-point of just 0.4 per cent this year and 1 per cent in 2010 – which would be well below the ECB’s target of an annual rate “below but close” to 2 per cent. He blamed the “severe downturn” as well as tumbling commodity prices.