Inflation fell sharply in both Spain and Italy last month, according to official figures released yesterday, putting renewed pressure on the European Central Bank to cut interest rates further.

In Spain, inflation as measured by the European Union's harmonised consumer price index fell to 1.5 per cent over the year to December. That was the lowest level in a decade and compared with 2.4 per cent inflation in November and a peak of 5.3 per cent in July.