The statistics agency said consumer prices rose 1.8 percent in the year to February, down from the previous month's 2 percent and expectations for a fall to 1.9 percent.
It also takes inflation below the European Central Bank's mandated target of just below 2 percent for the first time since November 2010 and to its lowest level since August of the same year.
Analysts said the fall may prompt the bank to cut its benchmark rate from the record 0.75 percent as soon as next week. A cut would could make it cheaper for businesses and families to borrow, spend and invest â¿¿ thereby generating growth in the economy.
"The lack of price pressures should leave the ECB's policy options open," said Jennifer McKeown, senior European economist at Capital Economics. "We think that the Bank might discuss an interest rate cut or other unconventional policies at next week's meeting."The euro, which has been under pressure for most of this week, edged down below $1.30 for the first time in nearly two months amid expectations of a potential rate cut from the ECB. It was trading 0.5 percent lower at $1.2999.