Surprise fall in UK inflation

Inflation in Britain was at its lowest level since March today after figures for September showed the annual rate had fallen by 0.2% to 1.1%.

Significant reductions in air fares contributed to the surprise drop, which should lessen the pressure on the need for immediate interest rate rises.

Seasonal falls in the cost of both plane and ferry tickets from high summer levels were far greater than last year’s discounts, the Office for National Statistics (ONS) said in today’s Consumer Prices Index update.

Analysts had expected the rate of inflation to remain unchanged following two consecutive falls in July and August.

It is now well below the Government’s target of 2%, although the Bank of England expects the figure to rise soon.

Investec economist David Page said the latest figure gave the Bank room to move on interest rates, which he believes will remain at 4.75% for the rest of the year.

He added: “They can now take their time to see what’s happening in the wider economy.”