Berlin, Oct 29 - Falling oil and food prices probably helped to cool German inflation for the third month in a row in October, giving the European Central Bank added scope to cut interest rates and bolster the flagging economy.
The annual inflation rate in Germany's most populous state, North Rhine-Westphalia (NRW), slowed to 2.3 percent this month from 2.6 percent in September, with the rate also dipping by 0.3 percentage points to 2.7 percent in Saxony.
The German state data have given the first insight into price trends across the euro zone. The two states account for over a quarter of Germany's price index, which itself makes up close to 30 percent of the gauge for the single currency area.
The ECB has raised the prospect of a rate cut next week, but at 3.6 percent in September, inflation in the euro area remains well above the bank's target level of just under 2 percent.
The consensus forecast of a Reuters poll of economists was that euro zone inflation would slow to 3.2 percent this month. A flash inflation estimate is due to be published on Friday.
Month-on-month, prices in NRW fell by 0.2 percent and by 0.1 percent in Saxony, led by cheaper fuel and seasonal foods, figures from the German states showed on Tuesday and Wednesday.
Germany's national gauge of consumer prices (CPI) -- due to be published later on Wednesday -- was seen dipping by 0.2 percent on the month. The annual inflation rate was expected to slow to 2.4 percent from 2.9 percent in September.
The EU-harmonised price index (HICP) was seen falling by 0.2 percent on the month. Prices were tipped to rise 2.6 percent on the year -- down from 3.0 percent in the previous month.
The ECB has said it expects inflation in the euro zone to ease as the year progresses, but continues to stress the need to keep price pressures across the bloc in check.
Amid growing concern about the economic outlook and turmoil on financial markets, ECB President Jean-Claude Trichet has said the bank could cut interest rates again when it meets on Nov. 6.
The ECB cut its benchmark to 3.75 percent on Oct. 8 in a coordinated move with other major central banks.
Recession fears were stirred again on Monday when a closely watched business survey showed corporate expectations in Germany, Europe's biggest economy, slumping to their lowest level since the country reunified in 1990.