UK: Inflation hits three-year low but energy prices threaten to reverse trend

INFLATION fell to its lowest level for nearly three years last month, official figures showed today, but energy price hikes are expected to put household finances under pressure once more.

The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) fell to 2.2% in September, down from 2.5% in August and the lowest level since November 2009.

However, while CPI is now less than half the 5.2% seen a year earlier, gas and electricity rises are expected to push it higher after four of the “big six” energy firms announced price rises.

The ONS said CPI fell last month when hefty energy price increases seen in 2011 dropped out of the index.

But with SSE, npower, British Gas and Scottish Power having announced moves to increase tariffs, CPI is expected to start rising once more after a year of falls.

The ONS said the recent spate of energy bill increases would likely lead to similar increases in inflation as seen last year, when utility price increases added 0.45% to CPI.

Rising fuel prices also put upward pressure on CPI last month, when petrol rose by 3.9p a litre between August and September compared with a fall of 0.3p a year ago, according to the ONS.

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Experts fear rising food prices will also push inflation back up.

Today’s figures showed the Retail Prices Index (RPI), which includes housing costs, also eased back last month, to 2.6% from 2.9% in August.

Last month’s inflation fall will come as bad news for basic state pensioners and those on benefits, as the Government uses September’s CPI figure to calculate their payment increases the following April.