UK inflation fell to 1.2% in September, the lowest rate since 2009, according to new figures from the Office for National Statistics (ONS).
The ONS said that falling oil and petrol prices were largely responsible for the drop, along with poor wage growth and falling import costs.
Supermarkets are also currently competing heavily with one another in a massive price war, cutting the cost of everyday goods, and therefore pushing down the Consumer Price Index (CPI).
This continued drop in inflation makes it even less likely that the Bank of England will raise interest rates this year.
The Bank have set a target for the CPI at 2% and, as raising the interest rate causes a drop in inflation, it’s unlikely that a rate rise will be made whilst inflation remains significantly below this target.
Analysts say that they expect inflation to fall further in coming months.
Chris Williams, chief economist at financial analyst, Markit, said:
“This more benign inflation outlook should certainly take pressure off the Bank of England to raise rates, and could even add to calls for policymakers to do more to shore up the recovery amid signs that growth could fade in coming months.”
The British Chambers of Commerces said the fall in inflation is a sign that the economic recovery is fragile, and that a raise in interest rates would put the upturn at risk.
Image by Luz Bratcher