UK inflation falls below target to 1.7 per cent - Chamber

The UK rate of inflation has fallen to its lowest rate in three-and-a-half years, confounding city projections, business leaders said today.

The Consumer Price Index (CPI) measure of inflation fell unexpectedly to 1.7 per cent in the year to September, according to the Office for National Statistics (ONS).

Lower airfares and petrol prices were the main drivers behind the surprise slowdown, official figures showed.

It means inflation - the rate prices rise at over time - is now below the Bank of England's 2 per cent target, paving the way for interest rates to be cut further next month.

 The ONS said motor fuels and lubricant prices were significantly lower, dropping by 10.4 per cent in September compared with the same month a year earlier.

Air travel costs also dragged down on the inflation rate, as lower air fares due to post-summer sales.

However, households were hit by a jump in food and non-alcoholic drink inflation, with stronger price increases for milk, cheese, eggs and fruit.

Raj Kandola (pictured), director of external affairs at Greater Birmingham Chambers of Commerce, said: “This morning's inflation results will be welcomed by both businesses and policymakers as the rate of CPI confounded city projections and dropped lower than expected.

“The Treasury will be pleased to see that core inflation has also fallen along with the pace of wage growth.

“Now all eyes will turn to the Bank of England to see whether the MPC respond with further interest rate cuts in the coming months.

“However, a potential spike in energy prices in October could temper expectations.

“Ultimately, we still need to see the new Government take appropriate fiscal measures that will reduce the cost pressures that businesses are still facing on a daily basis - the upcoming Autumn Statement provides the perfect basis to do so.”