The annual rate of inflation in the UK slowed last month to just 1.2 per cent, according to data published today by the Office of National Statistics.
Consumer Price Index figures, which measure the changes in the price of goods and services purchased by households, rose by 1.2 per cent in the year to September 2014, compared with an increase of 1.5 per cent in the year to August.
The main contributors were falls in transport costs - particularly sea and air fares - and the prices of recreational goods, such as laptop and tablet computers.
The ONS said prices for housing and household services, which includes rents and utility bills, have been the main contributor to the rate of inflation for almost two years and currently account for a third of the rate.
Across September, if these factors were removed, the rate of inflation would have been 0.8 per cent.
However, continuing falls in food prices and the price of petrol and diesel, mean that the rate of inflation would have been around a third higher had these not been included.
These prices have been among the main causes of inflation historically, although this has gradually changed over the course of 2014.
Calum Bennie, savings expert at Scottish Friendly, said: “Yet again inflation has dropped, this time by a relatively significant amount, indicating that interest rates will not rise too sharply too soon.
“According to our latest disposable income index, people currently have just eight per cent of their salaries left over each month after essentials are paid for.
“However, even with this drop in inflation, prices continue to rise ahead of wage increases and many could in fact feel worse off as we enter the festive season. Squirreling a few pounds away regularly helps build a safety net, which can be utilised when interest rates do eventually start to rise.”
Kevin Doran, chief investment officer at private bank Brown Shipley, added that today’s numbers remove any near term pressure on the Bank of England to raise interest rates, something that could be a cause for mild celebration for the masses.
“Yet, with inflation continuing to outstrip the rate of return on deposits, the ‘war on savers’ continues unabated.
“Since declaration of hostilities in March 2009, the rate of return on cash deposits has amounted to just 3%, during which time the cost of living (measured by RPI) has risen by 22 per cent.
“Representing an 18 per cent loss of purchasing power, the true rebalancing of the UK economy –which sees savers wealth transferred to borrowers – seems set to enter into its 6th year, with interest rates unlikely to rise until February at the earliest.”
ruth.gillbe@ft.com
