By Rachel More

BERLIN (Reuters) -Inflation eased across key German states in September, preliminary data showed, suggesting that inflation would also decrease nationwide in Europe’s largest economy, as European Central Bank doves build on their case for another rate cut.

The inflation rate in North Rhine-Westphalia, Germany’s most populous state, eased to 1.5% year-on-year from 1.7% in August.

In Bavaria, the inflation rate fell in September to 1.9% from 2.1% the previous month.

In Brandenburg, it eased to 1.4% from 1.7%, and in Saxony to 2.4% from 2.6%.

In Hesse, it declined to 1.2% from 1.5%.

In Baden-Wuerttemberg, it edged down to 1.4% from 1.5%.

Economists polled by Reuters forecast Germany’s harmonised inflation rate at 1.9% in September, down slightly from 2.0% in August, already its lowest level in over three years.

Economists will pay close attention to national inflation data, scheduled for release later on Monday, as Germany publishes its figures a day before euro zone inflation data.

Inflation in the euro zone is expected to ease further to 1.9% in September from 2.2% the previous month, according to economists polled by Reuters.

UPWARD TREND

Inflation has already eased in two other major euro zone economies, Spain and France.

However, the ECB always expected the September euro zone reading to be low – mostly because of the high base effect from energy a year ago – and inflation is now seen rising over the next few months.

LBBW’s senior economist Jens-Oliver Niklasch also pointed to an upward trend further down the line.

“We still expect inflation to pick up again towards the end of the year. But at the level now reached, the problem of inflation has been significantly defused,” Niklasch said.

“In light of the figures, the ECB governing council will also discuss whether a reduction in key interest rates might not be appropriate as early as October.”

However, the picture was mixed as euro zone government bond yields edged higher on Monday, after the German inflation data led investors to slightly scale back their bets on future ECB monetary easing.

(Reporting by Rachel More; editing by Matthias Williams, Kevin Liffey and Ed Osmond)

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