(RTTNews) - As expected, Eurozone inflation eased for the second straight month in September, official data showed Tuesday.

A flash estimate from the Eurostat showed that annual inflation slowed to 3.6% in September from 3.8% in August. Annual inflation for September came in line with economists’ expectations. Energy and food prices would have contributed to the moderation in inflation.

However, annual inflation continued to stay above the European Central Bank, or ECB target, which is to keep inflation rates “below, but close to 2% over the medium term”. Inflation had peaked to 4% in July, which was the highest since June 1992.

The statistical office is scheduled to release the final inflation numbers on October 15.

Among the largest eurozone economies, German consumer price inflation eased to 2.9% year-on-year in September from 3.1% recorded in August. Meanwhile, Italian inflation stood at 3.8%, down from August’s 4.1% and Spanish HICP inflation slowed to 4.6%.

Clemente De Lucia, an economist at BNP Paribas expects inflation to continue to moderate in the months ahead, despite rising core inflation.

Commenting on Eurozone inflation, Christoph Weil of Commerzbank said inflation would fall below 3% by the end of the year, giving room for European Central Bank to lower interest rates. Economists now expect a first such move in early 2009. Gloomy economic outlook as well as easing inflation will help in reducing inflation expectations.

Battling high inflation in a sluggish economy, the European Central Bank had maintained the rate at a seven year high of 4.25% in the Governing Council meeting held earlier in the month.

The EU15 nations had contracted 0.2% quarter-on-quarter in the second quarter, reversing a 0.7% expansion recorded in the first quarter. The euro area economy had shrunk in the second quarter for the first time since the launch of Euro nearly a decade ago.

Reinforcing the fears of recession, a survey conducted by European Commission showed that economic sentiment in September weakened to the lowest since 2001. Business confidence also deteriorated considerably in September, while Markit Economics survey showed that private sector output contracted in September at the fastest rate in almost seven years.

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