Surprise fall in UK inflation rate

Slower growth in house prices and cheaper foreign holidays helped to reduce inflation by 0.2% to from 2.6% for October, the Office for National Statistics (ONS) has announced today.

The RPIX inflation rate - which excludes mortgage interest payments and is the government's target measure - was also down, falling to 2.7% in October from 2.8% the previous month. The rate is slightly above the government's target set for the Bank of England at 2.5%.

Less rapid growth in house prices this year compared with a year ago was the main reason for the fall in inflation – which in turn led to much lower growth this year, said the ONS.

Overall, annual inflation in the housing element of the RPI was 6.7%, down from a recent peak of 8.6% earlier this year. The falling cost of foreign holidays also helped to push inflation down, with prices falling for most European destinations this year in contrast to price rises a year ago. Further downward effects came from household services.

University tuition fees and estate agent fees both rose less rapidly than a year ago, and there were reductions in some telephone call charges compared with price increases this time last year.

Inflation for seasonal food items also declined, in particular as prices for fresh vegetables fell back from high September levels, but this was largely offset by higher inflation for a number of non-seasonal food items including poultry, the ONS found.

(gmcg)