British inflation slows down in October

Britain's underlying rate of inflation, or RPIX, unexpectedly fell back by 0.1 percentage points to 2

Britain's underlying rate of inflation, or RPIX, unexpectedly fell back by 0.1 percentage points to 2.7 per cent last month as house prices and university tuition fees rose by less than a year ago.

The Office for National Statistics said RPIX, which excludes volatile mortgage interest payments, was unchanged on the month to give a 2.7 per cent annual rise, the slowest since January and defying expectations it would remain at 2.8 per cent.

The inflation rate remained above the Bank of England's (BoE) government-set target of 2.5 per cent for the 12th month running, however.

The overall headline rate of inflation, or RPI, rose 0.1 per cent on the month to stand 2.6 per cent higher than a year earlier, the smallest rise in almost a year.

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But the harmonised index of consumer prices, which excludes house prices and council tax, remained steady at just 1.4 per cent for the third month running.

The BoE will have to switch in January to targeting HICP and Chancellor of the Exchequer Mr Gordon Brown will announce in his pre-budget report on December 10th what the new target will be.

The ONS said the largest downward effect on the RPI index was housing due to the housing depreciation component rising less slowly than a year ago.

Another large downward effect came from household services as both university tuition fees and estate agent fees rose by less than a year ago. Leisure services also had a downward effect due to a further fall in the cost of foreign holidays in contrast to an increase a year ago.

The largest upward contribution came from motoring expenditure as second hand car prices fell less than a year ago.