German inflation slowed in September to its lowest level since early 2021, official data showed Monday, sliding further below the European Central Bank's two-percent target rate.

The annual inflation rate in Europe's biggest economy declined more than expected to 1.6 percent, down from 1.9 percent in August, preliminary data from federal statistics agency Destatis showed.

Analysts surveyed by FactSet had predicted a September inflation rate of 1.7 percent.

This month's reading is the lowest in Germany since February 2021, before consumer prices began their steady rise between the impact of the coronavirus pandemic and Russia's 2022 invasion of Ukraine.

September's drop in inflation was led by energy prices, which fell 7.6 percent from a year earlier, according to the data.

The fall in prices for fuel could be traced back to a "cyclical fall in oil prices since the end of August", LBBW analyst Jens-Oliver Niklasch said in a statement.

The German inflation data was well below the target of two percent set by the ECB, mirroring the trend seen in other large western European economies.

In France, inflation fell to 1.2 percent in September, down from 1.8 percent in the previous month.

Likewise, the inflation rate in Spain sat at 1.5 percent in September, a sharp fall from 2.3 percent in August.

Analysts were divided over the impact of the low inflation readings on the ECB's interest rates decision in October.

Consumer prices are still expected to rise faster again towards the end of the year, as the effect of last year's high energy prices dropped out of the calculations.

At current levels however the problem of high inflation had been "significantly defused", Niklasch said.

The ECB would consider whether another rate cut "might not be appropriate", following the central bank's move to reduce borrowing costs earlier this month.

Another October cut was "not a done deal yet", Franziska Palmas of Capital Economics said, pointing to higher core inflation.

The closely watched measure, which excludes volatile food and energy prices, sat at 2.7 percent in Germany in September.

Wage pressures likely mean core inflation will "only fall slowly", said Sebastian Becker, an analyst at Deutsche Bank.