THE last time it was this low, farthings were still legal tender, Denis Law had just signed for Manchester United and The Beatles were still a little-known guitar outfit playing gigs in Germany.

Inflation dropped to zero last month, setting the UK on course for a period of falling prices for the first time in half a century.

According to the Office of National Statistics, the last time it was negative was in March 1960, at minus 0.6per cent, shortly after Prime Minister Harold Macmillan had said Britons had "never had it so good."

The Consumer Price Index (CPI) measure of inflation dropped after recording 0.3per cent in January, a sharper than expected fall and a new record low.

The drop is likely to be good news for consumers as it means wages will wages will go further, leaving people with more money in their pockets.

It also comes amid a supermarket price war that has pushed grocery bills down and low energy costs meaning filling up at the petrol pump is not as expensive as it was a year ago.

Food and non-alcoholic beverage prices saw a record year-on-year drop of 3.3 per cent, after being flat or falling for 10 months, the longest stretch since 2000.

Milk, cheese, eggs, bread, jam and chocolate were among those putting downward pressure on CPI.

Motor fuels also saw a record decline of 16.6 per cent. A litre of petrol fell to 107p in February from 108.3p in January, down from 129p in February last year.

Some retail prices saw smaller than usual increases in February, after January discounts.

Among the items seeing price drops were laptops, tablet computers and printers, along with books, games, toys and hobbies.

Meanwhile, furniture prices rose by less than they did a year ago as discounts brought in at the start of the year kept prices low.

Economists believer the surprise scale of February's fall is likely to push back the expected timing of an interest rates hike, currently pencilled in for 2016.

Interest rates have been held at 0.5 per cent for six years but Bank of England chief economist Andy Haldane has said that in the light of low inflation the next move was as likely to be a cut as a hike.

Low inflation benefits consumers because it means their wages go further, but policy makers fear a prolonged period of negative CPI could have damaging effects.

That is because it is feared that deflation would cause consumers to delay spending and firms to put back investment.

Vicky Redwood, chief UK economist at Capital Economics, said: "The UK is now within a whisker of deflation.

"It looks odds-on that inflation will turn negative in March.", when the cut in gas prices by British Gas (the utility company with the biggest market share) will show up in the inflation figures for the first time.

"And inflation is then likely to remain around zero/slightly negative for the rest of the year."

Chief Secretary to the Treasury Danny Alexander said: "Today's zero inflation is the right sort of price freeze, with low oil prices feeding through to prices.

"It's yet another month that sees earnings pulling ahead of prices, which will be a great help to millions of families."