Recession tracker

A key measure of inflation has fallen to its lowest level since September 2004, official statistics show.

The government's preferred measure of inflation - the Consumer Prices Index (CPI) - dropped to an annual rate of 1.1% in September from 1.6% in August.

The Retail Price Index (RPI) also dropped slightly to -1.4%, down from -1.3%.

The Bank of England aims to maintain CPI inflation at 2% to keep both prices and the broader economy stable.

CPI peaked at 5.2% over the 12 months to September 2008, largely driven by the effect of record oil and energy prices, but by January 2009 had fallen to 3%.

It rose again unexpectedly in February to 3.2%, before falling back again in March and then again in the following months.

INFLATION CALCULATOR Check your personal inflation rate

The pattern of decline does not mean prices as a whole have fallen, yet, but instead suggests the rate at which they are rising has slowed.

The other key measure of inflation, the Retail Prices Index (RPI), rose to -1.3% from -1.4%.

The key difference is that RPI includes mortgage interest payments and housing costs. It has turned negative as cuts in interest rates reduced homeowners' mortgage payments.

Both measures of inflation are still expected to fall this year as recessions tend to bear down on inflation by making businesses compete hard on prices.

There had been fears that a steep fall may lead to deflation, where prices are lower than 12 months earlier.

Deflation is a problem because whatever stimulus measures are put in place, consumers may be put off making any purchases if they believe that prices will be lower in the future.

It is this situation which the Bank of England has tried to forestall by slashing interest rates and pumping new money into the economy, in order to stimulate spending and other economic activity.