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Last Updated: Tuesday, 17 October 2006, 08:33 GMT 09:33 UK
UK inflation eases on petrol dip
Man at a petrol pump
The fall in inflation, led by reduced petrol prices, was widely expected
UK inflation eased in September as petrol prices fell, official figures have shown.

Last month's Consumer Prices Index figure was 2.4%, said the Office for National Statistics - a reduction from the 2.5% seen in August.

Prices are still rising faster than the government's 2% target, however, leading economists generally to expect a rise in interest rates in November.

The RPI rate, which includes mortgage payments, rose from 3.4% to 3.6%.

Pensions increase

The increase to the September rate of headline RPI is however good news for pensioners.

This is because the government uses the September RPI rate to determine increases to state pensions each April.

As a result, pensioners are set to receive their biggest increase since 1997, more than 3 per week.

If the rise is given the go-ahead by parliament, the state pension for a single person will increase by 3.05 per week to 87.30 from next April.

'Upward trajectory'

Bank of England governor Mervyn King warned earlier this month that September's expected dip in inflation was likely to be only temporary.

The Bank kept interest rates on hold at 4.75% in both September and October, after raising them by one quarter of a percentage point in August.

Analysts said that while petrol prices may have fallen, other costs were going up significantly.

"While we expect petrol price falls to continue in the next couple of months, the mammoth increase in university tuition fees and continued utility bill hikes will ensure inflation remains on an upward trajectory beyond September," said Alan Clarke, economist at BNP Paribas.

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