MADRID, Jan 5 (Reuters) - Spanish inflation fell to a decade low 1.5 percent in December, as a severe economic slowdown coincided with sharp drops in food and commodity prices, suggesting broader euro zone price pressures have also dropped.
Spain's European Union-harmonised figure was well below a Reuters forecast of 1.9 percent, down from 2.4 percent in November, according to a preliminary estimate from the National Statistics Institute on Monday.
The data followed a lower-than expected German flash inflation figure for December.
Italy will report EU-harmonised inflation at 1000 GMT, followed by euro zone data on Tuesday, with many economists expecting sliding prices in the region to increase pressure on the European Central Bank to further cut interest rates.
"Inflation should turn slightly negative around June or July in Spain and the euro zone as well. I think the ECB will continue to cut, we believe to 1 percent (from 2.5)," said economist at BNP Paribas, Luigi Speranza.
European Central Bank Vice President Lucas Papademos said on Sunday that more interest rate cuts may be needed to shield the euro zone economy but stressed deflation would be kept at bay.
"Inflation will not be allowed to fall significantly below 2 percent for a protracted period of time, over the medium term, which we do not expect on the basis of our present analysis," he said. [ID:nN04347375]
Euro zone inflation is forecast to have dropped to 1.8 percent in December, from 2.1 in November.
Spain's December data, which showed a rate less than half that reported two months before, gave no detailed breakdown though analysts noted the effect of pre-Christmas price cuts to attract shoppers spooked by worsening economic conditions.
According to a survey conducted by Spanish newspaper El Pais on Sunday, festive-season staples such as spicy sausage and salted whiting saw price cuts in supermarkets of up to 15 percent before Christmas.
The Spanish economy is expected to have entered recession in the fourth quarter and soaring unemployment has lead to plummeting high street sales as Spaniards tighten their belts before what many believe will be a harsher 2009.
Spain will report, full final inflation on Jan 15. (Reporting by Paul Day, editing by Mike Peacock)