Annual inflation in the eurozone dropped to 2.5 percent in July from 2.7 percent in the previous two months, the European Union's (EU) statistical office Eurostat estimated on Friday.
But the key index was still well above the 2 percent ceiling preferred by the European Central Bank (ECB) to maintain price stability.
In order to contain inflationary pressure, the ECB raised its benchmark interest rate to 1.25 percent in early April, and to 1.50 percent in early July.
Since a tightened monetary policy would make life harder for countries like Greece, Ireland and Portugal, the ECB has been cautious in raising the key interest rate. But analysts said that it may have to make the hard decision under the pressure of rising oil and commodity prices.