Euro zone inflation fell as expected in September to its lowest in three and a half years as inflationary pressures continued to ease amid a weak economic recovery and shy domestic demand.

The rate of consumer price inflation in the euro zone fell to 1.1% year-on-year in September.

This was its lowest level since February 2010 when it stood at 0.8%, the EU's statistics office Eurostat said today.

The reading was down from 1.3% in August and was well below the European Central Bank's official target of an inflation rate of close to but below 2%.

Prices rose 0.5% from August, as a 0.4% drop in costs of food, alcohol and tobacco products and a 0.9% decline in prices of services were offset by a 3.4% jump in prices of non-energy industrial goods. Volatile prices of energy were up by 0.5% in September on the month.

ECB executive board member Peter Praet said earlier this week that inflation pressures in the euro zone remain subdued in the medium term, including 2015.

The low inflation environment allows the ECB to keep an ultra-loose policy stance with the main refinancing rate at a record low of 0.5% and the ECB said repeatedly it stood ready to react if the economy needs a further policy boost.

With inflationary pressures low, economic optimism in the euro zone brightened for the fifth month in a row in September and jumped to a two year high on the back on improving confidence across all sectors and confirmed the recovery was underway.

In a separate data release, Eurostat said the euro zone's foreign trade surplus grew to €7.1 billion in August from €4.6 billion surplus in August 2012, as exports fell by only 5% while imports were down 7% year-on-year.

A brightening export picture could be seen in the euro zone's southern periphery countries like Greece and Portugal, confirming their economies were re-gaining competitivenes sthanks to ongoing structural adjustment.

Exports in Greece, which hopes to return to growth next year after a six year recession, were up 6% in the first seven months of the year. Portugal, due to exit an international aid programme next year, saw exports up by 4% in the months between January and July.