Inflation slid to its lowest level in almost five years during August, official figures showed today.
The Consumer Prices Index (CPI) fell from 1.8% to 1.6% over the month, according to the Office for National Statistics (ONS). It’s lowest since November 2004.
Unchanged household energy bills this year compared with big hikes 12 months earlier dragged down the rate of inflation, along with falling food prices, the ONS said.
Wide-ranging price falls for products such as cereals, bread and cakes — helped by a better-than-expected European harvest — helped bring the annual rate of food inflation to 1.9% over the month, which is the lowest for more than three years.
But despite the downward pressure on inflation, the overall CPI measure did not fall as far as the 1.4% forecast by most City commentators.
Many have predicted that Bank of England Governor Mervyn King will soon have to write his first letter to the Chancellor Alastair Darling explaining why CPI has undershot the Bank's 2% inflation target by more than 1%.
The smaller-than-expected fall in the CPI was due to soaring petrol prices, with the average litre of petrol rising 1.1p to 103.8p over the month compared with a 5.5p fall 12 months earlier.
The price of second-hand cars also rose at its fastest ever rate for the month, against falling costs a year earlier, in a sign that Britons are tightening their belts due to the recession.
Second-hand car prices rose 2.2% over the month and are now 4.4% higher than a year ago — the highest ever annual increase since ONS records began in 1997.