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UK inflation tumbles to lowest level in five years

Cherry Reynard
Written By:
Cherry Reynard
Posted:
Updated:
05/12/2014

UK CPI inflation has fallen to its lowest level in five years, undershooting estimates as the impact of falling petrol prices dragged the headline level down near to 1%.

The release from the Office for National Statistics (ONS) revealed Consumer Prices Index (CPI) inflation fell from 1.5 per cent in August to 1.2 per cent in September, well below the dip to 1.4 per cent which was expected.

The ONS said a combination of falls in transport costs (notably sea and air fares) and prices for a range of recreational goods helped drive down the headline figure sharply.

This latest drop also bolsters the case for the Bank of England’s Monetary Policy Committee to hold off on raising interest rates, appearing to take any 2014 hike off the table once and for all.

September’s figure is the lowest rate of inflation since September 2009, when CPI stood at 1.1 per cent.

The ONS said if falling food and motor fuel prices were excluded, inflation would be a third higher thanks to soaring utility bills.

“Housing & household services (including utility bills) accounted for a third of the rate of inflation in the year to September. If falling food and motor fuel prices were excluded, the rate of inflation would be a third higher,” it said.

Meanwhile RPI dropped from 2.4 per cent to 2.3 per cent, in line with expectations the ONS said.