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European inflation pressures recede, and could help U.S.

The European Central Bank (ECB) shifted away slightly from an inflationary guard on Thursday, as the bank suggested the possibility of reducing interest rates later this year to help spur growth. A European interest rate cut could, some economists say, help reduce U.S. inflation.

As expected Thursday, the central bank’s Governing Council left its benchmark interest rate at 4.25%. But statements by ECB President Jean-Claude Trichet focused on declining economic growth.

“Economic activity in the euro area is weakening with contracting domestic demand and tighter financing condition,” Trichet said. “The economic outlook is subject to increased downside risks.”

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