The rate of inflation, as measured by the consumer price index (CPI), has fallen by 0.5% from September to October, according to the latest findings from the Office for National Statistics
This sudden drop in inflation comes as a surprise, and is below the forecast figure - in fact it is the lowest rate of inflation since September 2012.
The Office for National Statistics (ONS) said that the fall was partly driven by the biggest drop in transport costs since July 2009; they fell by 1.5% between September and October this year. Several supermarket chains are thought to have contributed to this, with many of them engaging in a price war which resulted in some fuel costs being reduced.
The ONS also stated that education costs played a part, with rising tuition fees having a smaller impact on inflation than at the same time the previous year. At the same time, food inflation fell from 4.8% to 4.3%.
Rob Carnell, economist at ING, said:
“Falling petrol and diesel prices seem to have done the most to drag the inflation rate down, and the ongoing softness in Brent crude prices means there may be a little more of this to come in the months ahead,
“There was also some price softness in furniture and household items too.”
This news has eased some of the pressure currently being placed on the Bank of England to raise interest rates; the Bank is now closer to its inflation target of 2%, which it has remained stubbornly above since 2009.
Chris Williamson, economist at Markit, said:
“The Bank of England's forward guidance states that a hike in interest will not be considered until unemployment drops below 7%,”
He said the latest inflation figures could “bring forward when the Bank expects this to happen from late 2016 to perhaps late 2015, given the recent flow of stronger than expected economic data”.
However, the string of recently announced price hikes by several energy companies have yet to take effect, and are likely to have an impact on inflation in the coming months.