UK inflation falls

UK inflation pressures were subdued in October

Britain's inflation rate fell unexpectedly in October, the Office for National Statistics (ONS) reported on Tuesday.

The fall was largely due to lower petrol prices which reversed the price increases seen in September.

The headline rate, widely used by wage negotiators, dropped from 3.3% to 3.1%.

Underlying inflation which does not include mortgage interest payments also fell from 2.2% to 2.0%.

Rises in the cost of non-seasonal foods put the main upward pressure on prices, though this was partly offset by supermarkets slashing the price of seasonal foods, as part of the ongoing supermarket price war.

At 2%, the key underlying rate, which is used by the Bank of England when setting interest rates, is well below the government's 2.5% target.

It is thought then that this latest data will ease pressure for a rise in interest rates and confirms the Bank of England's policy of keeping interest rates unchanged over the past nine months.

The Bank's key interest rate has been at 6% since February.

But analysts have given mixed reactions to the figures. "October is always a funny month. First of all, you have discounting and sales and secondly, you have seasonal food prices which can swing either way," said David Smith, economist at Williams de Broe.

Although looking ahead to next month, ONS said it was too early to say if the recent floods will cause the price of fruit and vegetables to rise.