19/11/2008 - Cheap fuel prompts inflation fall
More interest rate cuts are likely to be on the cards after inflation fell at its fastest rate for 16 years during October, thanks in the main to cheaper fuel prices.
Figures from the Office for National Statistics (ONS) show that the Consumer Prices Index (CPI) - the Government's official benchmark of the cost of living - slowed to 4.5% in October from 5.2% the previous month. The ONS said that the 0.7% decline, which was bigger than expected, is the largest monthly drop since April 1992.
Crude oil has tumbled to less than half its mid-July peak, leading to the average price of a litre of petrol falling 7.1p to 104.5p in the month to October, with diesel dropping 7p to an average 116.3p.
But the sharp fall brings home warnings of the threat of deflation - negative inflation - next year from Bank Governor Mervyn King and Prime Minister Gordon Brown.
The UK could be forced into a deep slump if there is a prolonged cycle of falling prices, and experts said that rates could fall further from the current 53-year low of 3% to kick-start the economy.
Copyright © Press Association 2008
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