Inflation rate falls to 1.2% - its lowest since 2009

The UK’s Consumer Price Index measure of inflation has fallen to 1.2% over September, down from 1.5% the month before.

The rate has fallen as fuel prices have been slashed, and as supermarkets have battled to win over customers with lower prices.

The CPI rate is at its lowest since 2009, when it fell to 1.1%.

The Office for National Statistics also highlighted cheaper transport costs as a reason for a fall in rates, notably in sea and air fares.

The news could mean that those hoping for a rise in interest rates before next year’s general election may be disappointed, economists have said.

Jeremy Cook, chief economist at WorldFirst said: “Food prices are in deflationary territory by 1.4% on the year - the sharpest drop since 2002 - as supermarkets aim to increase their market share through price wars, while the oil price has slumped 24% since June of this year. This has helped consumers, of course, but does little for corporate profitability or for rate expectations.

“This is only half of the real wage argument and people will still be seeing real-term pay cuts, even at this five-year low in price rises. It also lessens the pressure on the Bank of England to increase interest rates soon.

“I think this is the final nail in the coffin for expectations of a November rate hike, although those had dwindled of late, and puts pressure on our estimates of a February increase in borrowing costs.”

 

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