Inflation fall eases rate rise pressure

Inflation 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 for an immediate interest rate rise.

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

Analysts had expected the rate of inflation to remain unchanged after 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.

David Page, an Investec economist, 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 is happening in the wider economy."

Slower rises in communication costs, including cheaper calls to mobile phones, added to the fall, while the price of vegetables rose by less than a year ago, when supplies were affected by hot and dry growing conditions.

Small downward effects also came from hotels and restaurants, the ONS added.
In contrast, the cost of package holidays, furniture and furnishings grew at a faster rate than last year.

The CPI differs from the old measure of Retail Price Inflation (RPI) because of the absence of housing and council tax costs.

Today's figures showed that headline RPI fell by 0.1% to 3.1%.