Euro zone inflation held at 3.0 percent for a second month in October, with economists saying it had likely peaked and would soon fall in a struggling economy, giving the European Central Bank room to cut interest rates and focus on growth.

Now at a three-year high, consumer prices in the 17-nation currency area rose 0.3 percent in October alone, the European Union's statistics office Eurostat said on Wednesday.

Inflation stayed above the ECB's target of close to, but under 2 percent, pushed up by higher oil, clothing and food prices.

Many economists say a worsening business climate, crippled by the euro zone sovereign debt crisis, means consumer prices won't go higher.

October should be the peak, so we see inflation coming down in November, but only moderately, to 2.9 percent, said Marco Valli, chief euro zone economist at Unicredit. If I had to say, I would expect an ECB rate cut in January, but it is an extremely close call.

With price pressures easing, many economists expect new ECB President Mario Draghi to repeat this month's 25-basis point interest rate cut to 1.25 percent again soon to boost a euro zone economy that stands on the brink of recession after barely growing in the third quarter.

European Commission President Jose Manuel Barroso warned on Wednesday that the region's growth would be low at best, while unemployment would remain at about 10 percent for the next two years.

If you look at the fact that the ECB cut rates in November, I think it does not mean that they will stop cutting in December, said Carsten Brzeski at ING. I think their main focus is on growth these days and not on headline inflation.

NO STAGFLATION

With Brent crude at over $110 a barrel, supported by growing supply concerns and tensions over Iran's nuclear program, energy costs remain high in Europe, fuelling concerns about possible stagflation.

But many economists expect oil price rises to abate by early next year, and excluding energy, consumer inflation in the euro zone was 2.0 percent in October, in line with the ECB's goal.

That could take overall inflation down to below 2 percent in the first half of next year, according to IHS Global Insight.

Still, the ECB's call is not an easy one. Energy prices may stay high until March and even if the bank cuts rates to 1 percent in the next few months, it may not be prepared to go further. Even at the height of the 2008/2009 crisis, the biggest downturn since the 1930s, the ECB did not go below that level.

High energy costs were evident in the Eurostat data, with transport price inflation reaching 5.8 percent in October, the highest in the euro area index, followed by alcohol and tobacco at 4.4 percent on an annual basis.

The price of clothing rose 2.3 percent in October compared to a year ago, partly due to a change in which Eurostat measures the data, and food prices jumped 3.1 percent.

On a country-by-country basis, consumer prices rose 3.4 percent in Belgium and 3.0 percent in Spain in October. Price inflation was 2.5 percent in France and 3.8 percent in Italy, where the government raised value added taxes to convince markets it can service its debts.

(Additional reporting by Christopher Le Coq; Editing by John Stonestreet)

Inflation