* Inflation 0.3 pct m/m, confirmed at -0.2 pct y/y
* Price growth seen as energy comparison effect wanes
* ECB seen keeping rates on hold
(Updates with analysts' comments, graphic)
By Marcin Grajewski
BRUSSELS, Sept 16 (Reuters) - Falling energy prices kept euro zone annual inflation in negative territory in August, data showed, strengthening the case for the European Central Bank to keep interest rates steady despite nascent economic recovery.
Consumer prices in the 16-country area increased 0.3 percent on the month and dipped 0.2 percent from a year earlier, the European Union statistics office said on Wednesday, confirming its year-on-year figure reported two weeks ago.
The numbers were in line with analysts' expectations.
It was the third straight month of annual falls in prices but officials say they see no danger of deflation, or a prolonged price decline coupled with consumers' expectations of further dips. In July, prices dropped by a record 0.7 percent.
"It seems highly probable that July marked the deepest deflation in the euro zone and consumer prices may well turn positive year-on-year as soon as this month," said Howard Archer, chief European economist at IHS Global Insight.
The European Central Bank and the European Commission have said consumer prices are likely to fall for a few months in mid-year because of record high oil and food costs a year before.
Energy prices fell 10.2 percent year-on-year in August while core inflation, which excludes energy and food costs and is closely watched by the ECB, was 1.2 percent in annual terms.
The European Commission forecast this week that euro zone inflation would be 0.4 percent in 2009.
The ECB wants annual price gains to be just below 2 percent over the medium term. The data could encourage the bank to keep its main interest rate at a record low 1.0 percent for many more months, despite signs of economic recovery.
"There are no inflationary pressures, so there is time to raise interest rates later. We expect the first rate increase next year," said Christoph Weil, economist at Commerzbank.
The Commission expects the euro zone's economy to start growing in the third and fourth quarters after a big contraction in the first half of 2009 as the worst economic crisis since World War Two led to factory closures and lay-offs.
The EU statistics office, Eurostat, said transport fuels and heating oil had the biggest impact on the year-on-year inflation result, subtracting 0.67 percentage point and 0.35 percentage point respectively.
Prices in restaurants and cafes as well as tobacco costs had the biggest upward impact on inflation, of 0.15 and 0.14 percentage point respectively. (Editing by Dale Hudson)