In a milestone moment in the cost of living squeeze, the consumer prices index (CPI) fell to 1.7% in September, data from the Office for National Statistics shows, down from 2.2% in August.
Cheaper petrol and flights helped push the annual rate of inflation down last month but there was a pickup in food inflation.
The ONS chief economist, Grant Fitzner, said: “Inflation eased in September to its lowest annual rate in over three years. Lower airfares and petrol prices were the biggest driver for this month’s fall.
“These were partially offset by increases for food and non-alcoholic drinks, the first time that food price inflation has strengthened since early last year.
“Meanwhile, the cost of raw materials for businesses fell again, driven by lower crude oil prices.”
Core CPI (which strips out energy, food, alcohol and tobacco) rose by 3.2% in the 12 months to September 2024, down from 3.6% in August.
Goods prices fell at a faster rate – the CPI goods inflation index fell to -1.4% last month from -0.9% in August.
Services inflation slowed, from 5.6% to 4.9%.
Transport prices were pulled into deflation last month, by a chunky fall in airline prices.
The ONS reports that the air fares index, which tracks domestic, European, and long-haul flights, fell by 34.8% during September compared with August (when there was a large jump in prices).
There is usually a drop in air fares in September, as the summer holiday season ends, but this is much larger than the 23.2% fall in monthly prices in September 2023.
Indeed, it is the fifth largest fall since the monthly prices started being collected in 2001.
The pound has dropped on the foreign exchange markets, after UK inflation dropped faster than expected in September.
Sterling has lost half a cent against the US dollar, to $1.302, down from $1.307 before the CPI data hit the newswires.
The agenda • 9.30am BST: house price and rental costs data from the ONS • Noon BST: US weekly mortgage approvals • 2pm BST: IMF to publish a chapter of its world economic outlook
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