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UK inflation falls to three year low

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The UK's main inflation rate has fallen to 2.2% in September from 2.5% in August, dropping to its lowest level for three years.

Official data from the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) inflation rate has fallen back towards the Bank of England’s 2% target.

Meanwhile, the Retail Prices Index (RPI) rate has fallen to 2.6% ,down from 2.9% in August.

Capital Economics predicted today’s CPI reading could show inflation falling below its target for the first time since November 2009.

However, rising petrol prices in September kept inflation above the 2% level.

Having been as high as 5.2% last September, CPI inflation has been steadily declining over the past year.

Inflation has come in sharply as global growth has slowed and the UK’s economy struggles out of its current low growth malaise.

In June CPI inflation came in at 2.4%, the lowest level since 1.9% for November 2009.

The Bank of England’s £375bn quantitative easing programme – and its move to slash the base rate to a record low of 0.5% – has helped to stimulate inflation and stave off a deflationary environment.

Many economists anticipate the Bank of England will pump more monetary stimulus into the economy in November, expanding its asset purchase target by a further £50bn to £425bn.



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