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UK inflation back in negative territory at -0.1%

The UK consumer price index fell from zero in August to -0.1% in September
The UK consumer price index fell from zero in August to -0.1% in September

UK inflation dipped back in to negative territory last month as falls in the prices of food and petrol and muted rises for new fashions edged down the cost of living. 

The UK consumer price index (CPI) rate of inflation fell from zero in August to -0.1%.  

Inflation has hovered around zero since February, and September's inflation measure is the lowest since March 1960, according to the Office for National Statistics. 

This means the Bank of England continues to face little pressure to raise interest rates, though some officials think underlying inflationary pressure is building as the economy recovers.

Inflation was pulled lower as food prices fell by 2.5% in the year to September as the supermarket price wars continued to grip the grocery industry. 

It was the 15th month in a row of falling prices in this sector, extending the longest since records began in 1989. 
 

Petrol prices also dragged inflation lower, with prices falling by 3.7 pence per litre over the year, while diesel prices at 110.2 pence per litre are at their lowest level since December 2009.

The ONS figures also showed that the Retail Prices Index (RPI) fell to 0.8% in September from 1.1% in August. 

September's CPI inflation figure is used to calculate the following year's rises in State pensions, although the UK government's "triple lock" ensures an increase of at least 2.5% as the guarantee means it will increase by whichever is the greater out of average earnings, September's inflation rate or 2.5%. 

Muted CPI inflation leaves the prospect of a hike in interest rates - which have been at 0.5% for more than six years - unlikely well into next year. 

It will spare borrowers higher repayment costs, but continue to hurt savers whose nest eggs have been eaten away by years of low rates. 

Expectations over when rates will rise have been pushed back by turbulence in the global markets, shaken by signs of a slowdown in China, as well as gloom over the UK economy after third quarter growth forecasts have been scaled back in recent weeks. 

Bank of England governor Mark Carney said in August he "wouldn't be surprised if we have another month or two of negative inflation" after it fell to -0.1% in April.

However, he maintained that the likely timing of a rate hike was "drawing closer".