ROME, Oct 31 (Reuters) - Italian EU-harmonised inflation eased for the second month in a row to 3.6 percent in October, driven by a slide in prices of energy and food items like bread, statistics agency Istat said.
The data was largely in line with forecasts from a Reuters poll that estimated inflation would slow to 3.5 percent, and analysts said the fall in energy and food prices would continue to drive inflation lower in the coming months.
"The data is in line with expectations," said Marco Valli of UniCredit. "It is clear that the slowdown is driven by non-core components, such as energy and food, whose prices will continue to fall."
He estimates that inflation will fall below 3 percent by year-end and could dip to below 2 percent by mid-2009 if energy prices continue to fall. Oil prices have lost more than half their value since striking a high over $147 a barrel in July.
The pace of Italian consumer price rises has slowed from 3.9 percent in September and August's peak of 4.2 percent.
The data leaves Italian inflation still above the euro zone average -- which fell to 3.2 percent as expected on Friday -- and almost double the European Central Bank's 2 percent target.
The rise in food and drink prices slowed to 5.2 percent in October from 5.7 percent in September, with the price of bread -- over which Italian consumers held a one-day strike last month -- falling slightly on the month.
But the price of Italians' beloved pasta -- a source of growing anger -- continued to rise, and costs 32 percent more than it did a year ago, Istat officials said.
High inflation is one factor depressing Italian consumption which is contributing to stagnation or possible recession in an economy reliant on growth in exports, which themselves have been hit by a strong euro and the global economic slowdown.
Until the start of this year, Italian inflation was usually well below 3 percent but food and fuel price rises pushed it above 4 percent in June where it remained until September.