Inflation ‘set to fall’ as petrol prices stall

City experts on average predict that the Office for National Statistics will say that the Consumer Prices Index (CPI) eased back to 2.6 per cent from 2.7 per cent in August.

Analysts from Scotiabank said petrol prices were flat in September while they rose over the same period last year, pointing to a fall in headline inflation readings.

Petrol price declines in recent weeks are expected to have an even bigger effect on October’s cost of living measure, they said.

Meanwhile, food inflation should slow as double digit increase in fruit and vegetables ease off while airfares also stall.

Further down the track, however, utility bill rises could have an upward effect, after SSE became the first of the Big Six energy firms to announce a hike in gas and electricity tariffs this year.

House price rises spurred by the Government’s Help to Buy initiative are likely to push up some measures of inflation as well.

Scotiabank predicts CPI will be flat at 2.7 per cent for September while Samuel Tombs of Capital Economics forecasts a fall.

Mr Tombs said the view of a recovery led by improvements in productivity should mean the economy being spared building price pressures, adding that the CPI figures should be a step closer to the Bank of England’s two per cent inflation target.

Howard Archer of IHS Global Insight, forecasts the rate to head down to 2.5 per cent by the end of 2013, amid the effect of muted wage growth and unemployment on consumers’ purchasing power.

Inflation has remained stubbornly above the Bank’s target since December 2009 and family incomes have been squeezed as wages fail to keep pace.

Average earnings increased by just 1.1 per cent in the three months to July compared with a year earlier.