BRUSSELS, Aug 31 (Reuters) - Euro zone consumer prices fell for the third month running year-on-year in August, data showed on Monday, but by less than the record drop in July and economists expect them to start growing again in coming months.
Prices in the 16-country area fell 0.2 percent this month, European Union statistics office Eurostat estimated, after a 0.7 percent drop in July and a 0.1 percent easing in June.
Economists polled by Reuters had on average expected a 0.3 percent fall in August, but some had forecast a 0.2 percent dip after stronger-than-expected German inflation data last week.
A detailed breakdown of the estimate and month-on-month data will be available on Sept. 16. The fall in prices is likely to be mainly due to cheaper oil, the cost of which has roughly halved since August 2008.
The data comes before the European Central Bank's interest rate setting meeting on Thursday, at which markets expect the bank to leave its main refinancing rate unchanged at a record low of 1 percent despite nascent signs of an economic recovery.
The ECB wants inflation to be just below 2 percent. It has said there was only a small risk of deflation, which it defines as prolonged price falls accompanied by expectations of more price declines.
A monthly consumer survey by the European Commission showed that inflation expectations among households set a new record low in negative territory in August for the fifth month in a row -- a clear sign for the ECB there was no need to raise rates.
But with data pointing to the euro zone exiting recession in the third quarter, cutting interest rates further is also unnecessary, economists believe, especially as the ECB was likely to raise its economic growth forecasts in September. (Reporting by Jan Strupczewski, editing by Dale Hudson)