* Inflation -0.8 percent m/m, 1.0 percent y/y
* Core inflation -1.3 percent m/m, 0.9 percent y/y
(Updates with analysts quotes)
By Marcin Grajewski
BRUSSELS, Feb 26 (Reuters) - Euro zone inflation remained subdued in January, final data showed, cementing expectations the European Central Bank will keep interest rates on hold for months to come as economic recovery remains fragile.
The European Union statistics office confirmed its earlier estimate that consumer prices in the 16-country currency bloc rose 1.0 percent year-on-year, up from 0.9 percent in December.
Month-on-month inflation was -0.8 percent in January, the data showed on Friday, in line with the expectations of analysts polled by Reuters. Prices fell for clothing, household equipment, communications, culture, hotels and restaurants.
"Underlying inflation across the euro zone seems likely to be held down by large output gaps across the region following deep recession, only gradual recovery, muted capacity utilisation, and high and still rising unemployment," said Howerd Archer, chief European economist at Global Insight.
Energy prices, which had long been falling and pushing inflation down, rose in January by 2.1 percent month-on-month for a 4.0 percent annual gain.
The data strengthened expectations that the ECB will keep its main interest rate at a record low of 1 percent until late 2010 or even 2011.
Economists say inflation in the euro zone could hover around 1 percent this year, with rising energy and food prices pushing it up and declining core inflation pressing it down.
What the ECB calls core inflation -- stripping out volatile unprocessed food and energy prices -- fell to 0.9 percent year-on-year from 1.0 percent in December, which can only partly be explained by the sales season in January.
"There is really no underlying inflationary pressure at all so we are very far from the official ECB target. The ECB is likely to keep rates unchanged for most of the year," said Carsten Brzeski, analyst at ING.
The ECB wants to keep consumer prices growing slightly below 2 percent annually over the medium term. (Editing by Dale Hudson)