German inflation falls to 1.8% in Sept raising rate cut hopes

German inflation fell more than expected in September to 1.8%, according to preliminary data from the federal statistics office released on Monday.

The decline compares with expectations of a 1.9% reading and 2% in August. Lower energy prices and some goods costs were the main drivers, the agency added.

In Italy, inflation sank below 1% as consumer prices rose just 0.8% in September on an annual basis and from 1.2% in August, according to official data. The country's statistics institute cited lower energy, transport and communication costs. Spain and France recorded falls below 2% on Friday.

Inflation data for the 20-nation eurozone will be released on Tuesday, with forecasts of a slowdown to 1.8% from 2.2% in August.

"With inflation falling faster than expected and large cuts in the US, we think the ECB council may find a small majority to agree on an October rate cut. However, we acknowledge risks to this call as we think services inflation will remain sticky in September due to unfavourable base effects," said Alexander Valentin, senior economist at Oxford Economics.

Reporting by Frank Prenesti for Sharecast.com