Eurozone economic sentiment fell to record lows in March, increasing the likelihood of a further interest rate cut by the European Central Bank on Thursday.

A recent survey by the European Commission revealed that economic sentiment in the 16 countries using the euro fell to 64.6 points, a drop from 65.3 points in February.

Experts had predicted a slight rebound to 65.5 points, but inflationary pressures are now falling as quickly as economic activity.

Inflation

The ECB hopes to achieve annual inflation at just below 2pc, but consumer price growth slowed already to 1.2pc in February and is seen falling to 0.8pc in March. Inflation expectations among households are down to 1 point, the lowest level ever, from 5 points in February.

The March economic sentiment reading is the lowest value since the series began in 1985. All of the index's components were weaker than expected, pointing to deepening economic gloom before the European Central Bank meets on interest rates amid strong expectations of a 50 basis point cut to 1pc.

"The survey reinforces the already compelling case for the ECB to cut interest rates further and we expect the bank to deliver another 50bps reduction from 1.5pc to 1pc," said economist Howard Archer.

A separate study revealed that worldwide economic confidence has halved over two years. The Ipsos Mori survey in 22 countries polled found that the sharpest fall in confidence was in big western economies.

Gideon Skinner, a director of Ipsos Mori, said that it was important for G20 leaders meeting in London this week "to communicate a sense of hope".

"The act of cutting back is helping create what the public fears most: a full-blown, deep and long-lasting economic decline," Mr Skinner added.

Unemployment

A further study carried out by the Organisation for Economic Co-operation and Development (OECD) has predicted that one in 10 workers in advanced economies will be without a job next year. The study pointed out that there would be "practically no exceptions" among advanced countries and would be the largest and most rapid increase in OECD unemployment in the postwar period.

The OECD forecast that advanced economies will contract by 4.3pc in 2009 with little or no growth expected in 2010.