Eurozone inflation fell to below the European Central Bank’s target for the first time in more than three years, suggesting the lengthy struggle to bring price rises under control is nearing an end.

The European economy is facing headwinds amid subdued activity in the region’s manufacturing base, ECB President Christine Lagarde said on Monday.

The European Central Bank will do "anything" to remove hurdles to cross-border bank mergers in the euro zone, supervisory chief Claudia Buch said today, as Italy's UniCredit eyes a bid for Germany's Commerzbank.

FRANKFURT (Reuters) -Mergers between European banks are "desirable" if they help them compete with their U.S. and Chinese rivals, European Central Bank President Christine Lagarde said on Monday, as Italy's UniCredit pressed for a tie-up with Germany's Commerzbank.

ECB chief Christine Lagarde said Monday that cross-border banking mergers in Europe were "desirable" to boost their competitiveness, despite mounting German opposition to a potential tie-up between Commerzbank and Italy's UniCredit.

An interest-rate cut that European Central Bank officials deemed unlikely just three weeks ago now seems a near certainty when they next set policy on Oct. 17.

Euro area inflation slowing down means that there are now more reasons to justify an interest rate cut at the ECB's October policy-setting meeting, Finnish ECB policymaker Olli Rehn said in a speech on Tuesday.

With eurozone disinflation broadening, markets now price in six consecutive 25bp cuts from the European Central Bank, including one in October.