Eurozone inflation fell only a fraction to 3.6 per cent year-on-year in September, making an interest cut unlikely when the ECB meets on Thursday.

The 0.2 per cent fall from the previous month was anticipated, but the rate remains at almost double the European Central Bank’s target. The ECB aims to keep inflation at close to but less than 2 per cent.

Inflation in the eurozone hit a record 4 per cent in July as oil prices fell from a peak of nearly $150 a barrel.

Howard Archer, chief economist at Global Insight, said: “We expect eurozone inflation to retreat significantly over the rest of 2008 and through 2009 as underlying inflationary pressures are increasingly diluted by markedly weaker eurozone economic activity, softening labour markets and extended tight credit conditions.”

The news comes as President Sarkozy called in the heads of France’s main banks and insurance companies for talks on the impact of the financial turbulence which has hit Europe.

Four European financial institutions including Fortis, the Belgian bank, and Dexia, the Belgian local government financing specialist, have been bailed out by governments in the past couple of days in an attempt to minimise the damage caused by financial market turbulence.

This morning, Belgium, France and Luxembourg pledged to inject €6.4 billion (£5.1 billion) to keep Dexia afloat. The German government intervened in the market yesterday as it led a consortium of banks to salvage Hypo Real Estate, the commercial property lender, with €35 billion in credit guarantees.

Mr Sarkozy has called for Europe-wide action on the crisis. He said yesterday: "There have been multiple contacts between the different European governments. The situation requires rapid reactions. Everybody must show calm and a sense of responsibility. We must not give way in the face of destabilisation. We have to support the banks.”

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