INFLATION has fallen to a five-year low of 1.2 per cent, making it less likely the Bank of England will raise interest rates soon.
According to the Office for National Statistics (ONS), the Consumer Price Index (CPI) measure of inflation dropped more sharply than expected in September. It had been at 1.5 per cent in August.
Howard Archer, from IHS Global Insight, said: "Consumer price inflation of just 1.2 per cent in September advances the mounting case for the Bank of England to hold off from raising interest rates until well into 2015, rather than in the first quarter."
The ongoing supermarket price war and lower petrol price were the main factors in the inflation dip last month
Food and non-alcoholic beverages fell by 1.4 per cent year-on-year which was the steepest drop since June 2002 and the fifth month in a row that they have not risen on an annual basis. It is also the longest sustained period of flat or falling food prices since the end of 2004.
Tumbling oil prices saw petrol down by 0.8p per litre and diesel by 0.7p in September, when compared with the previous month.
The ONS said that if food prices and motor fuels were excluded then CPI would be around 1.6 per cent.
The data also revealed price were lower at restaurants and cafes last month compared to September 2013.
Lower prices on other items that contributed to the inflation slowdown were sea and air fares, laptops, tablets, books and games consoles.
CPI is now at its lowest since September 2009 when it stood at 1.1 per cent. The Retail Price Index (RPI), a separate measure which includes housing costs, fell from 2.4 per cent to 2.3 per cent, its lowest level since November 2009.
Chris Williamson, chief economist at Markit, said: "While a few months ago, the likelihood was growing that the Bank of England might need to hike interest rates in late 2014 or early next year, the data are now stacking up to suggest a hike could be delayed at least until next summer after the election."
ING Bank economist James Knightley said: "With inflation substantially below the Bank's two per cent target and the eurozone growth outlook appearing to deteriorate, there is little pressure to tighten monetary policy any time soon."
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