Berlin - Inflation in the 15-member eurozone fell sharply in November and unemployment edged higher, data released Friday showed, as a result helping to pave the way for the European Central Bank (ECB) to deliver a hefty rate cut next week.

The European Union's statistics office preliminary data said annual inflation in the eurozone tumbled from 3.2 per cent in October to 2.1 per cent this month as falling oil prices reduced inflationary pressures. The most optimistic analysts' forecasts were for a drop to 2.4 per cent.

While the Eurostat statistics office said eurozone unemployment rose to 7.7 per cent in October, the fall in November consumer prices trimmed inflation back down close to the ECB's two-per-cent target for annual inflation.

Unemployment stood at 7.6 per cent in September and 7.3 in October last year with the signs of a pickup in the numbers of out work adding to evidence that the eurozone economy is rapidly losing momentum in the wake of the world financial crisis.

The slump in inflation "gives the ECB room to continue to cut rates quickly," said Commerzbank economist Christoph Weil who predicts that eurozone inflation could drop to as low as 1 per cent by early next year.

Indeed, leading ECB officials including bank chief Jean-Claude Trichet have already signalled that the ECB's 21-head rate-setting council was gearing up to ease monetary policy further when it holds one of its regular-out-town meetings in Brussels next Thursday.

Inflation hit a 16-year high of 4 per cent in June as oil prices headed towards a record of nearly 150 dollars a barrel. However, this month oil prices crashed to a 22-month low of under 50 dollars a barrel as a slowing world economy hit demand.

With the global economic downturn rapidly gaining momentum analysts are predicting that the Frankfurt-based ECB will cut borrowing costs by 50 basis points to 2.75 per cent, which would be the lowest level in more than two years. A cut next week would also be the third in two months by the ECB.

In addition, next week's expected rate cut will coincide with the ECB unveiling its latest so-called staff projections for the eurozone, which are likely to include downward revisions in both economic growth and inflation forecasts for this year and 2009.

Moreover, some economists believe that the ECB will be forced to slash rates by 75 or even 100 points in a bid to spur growth in the eurozone.

"The dramatic 1.1 percentage point decline in eurozone inflation in November and the further increase in unemployment will give the doves on the ECB's Governing Council even more ammunition to argue the case for a larger-than-50 basis points cut at next week's policy meeting," said ING economist Martin van Vliet.

But the ECB has never cut rates by more than 50 basis points so a 75 or 100 basis-points reduction next week would underscore the deepening sense of gloom surrounding the European economy.

Economic sentiment in the eurozone tumbled to a 15-year low in November, a key survey released Thursday showed, after the eurozone tipped into recession in the third quarter.

Next Thursday's widely expected eurozone rate cut follows the ECB's decision to deliver a 50-basis-points reduction at its meeting in early November, dropping the cost of borrowing to 3.25 per cent.

However, adding to the pressure on the ECB to go further than 50 basis points next week has been the dramatic move earlier this move by the Bank of England to deliver a 150-basis-point reduction and Switzerland's normally conservative national bank chopping 100 basis points off rates.

China this week announced a 108-point cut, which was the biggest reduction in borrowing costs in the country since the Asian financial crisis a decade ago.