Italy inflation could drop to 3.4% by year-end, minister says

ROME (Reuters) - Italy's inflation rate could fall to 3.4% by the end of this year, far below the current level over 5%, thanks to measures to rein in prices of essential staple items between October and December, the industry minister said on Tuesday.

Inflation in Italy is gradually declining from peak levels but remains a headache for Prime Minister Giorgia Meloni, at a time when companies are often blamed for passing on more than the direct increase in production costs to consumers.

"I think we would be satisfied if inflation on Dec. 31 was reduced to 3.4%," Industry Minister Adolfo Urso said in a radio interview.

The government last week signed off a deal with distributors' associations to step up the fight against inflation while also securing cooperation from producers, although the last word on binding commitments remained in the hands of individual companies.

Italian EU-harmonised consumer prices (HICP) rose a preliminary 1.7% month-on-month in September, with annual inflation accelerating to 5.7% from 5.5% in August, data showed on Sept. 29.

The main domestic price index (NIC) was up 0.2% from the month before and up 5.3% annually in September, following a 5.4% annual rate in August.

"We want to deliver an important and significant blow to inflation and at the same time boost consumption," Urso said.

In its Document of Economy and Finance (DEF) published on Saturday, the Treasury sees average inflation measured using the consumption deflator at 5.6% this year and 2.4% in 2024.

Under the so-called "anti-inflation pact", participating supermarkets chains and small retailers should define a basket of food and non-food staples to which lowered prices apply in the last quarter of this year, with basic necessities also including childcare and personal care products.

Groups supporting the campaign include Italian chain CONAD, French retailer Carrefour and confectionery maker Ferrero, sources familiar with the matter said.

France announced a similar plan in August and faced challenges obtaining the support of big players such as Unilever, Nestle and PepsiCo.

(Reporting by Francesca Piscioneri and Giuseppe Fonte; Editing by Bernadette Baum)