The Consumer Price Index (CPI) measure of inflation came in at 5% year-on-year for October, down from 5.2% in September as both food and petrol prices fell.
RPI annual inflation, which includes mortgage interest payments and council tax also fell 0.2% in the month – from 5.6% to 5.4%.
Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said: "This should mark the beginning of a relatively rapid descent back to the 2% target. Global commodity prices have fallen sharply in recent months and there is already evidence that this is being reflected in weaker inflationary pressures at the factory gate.
"When you also consider the fact that the VAT rise and sharp increases in petrol prices will drop out of the year-on-year calculation in early 2012, we think that inflation will be back below 2% by this time next year."
The Bank of England’s Monetary Policy Committee (MPC) has repeatedly said above-target inflation is a temporary ill that has been imported through higher commodity prices and the VAT rise at the start of the year.
It is for this reason it has steadfastly refused to increase the base rate to combat rising inflation, choosing instead to make policy decisions with the greater fear of stagnant growth, or worse recession, in mind.
David Miller, Partner at Cheviot Asset Management, agrees with this diagnosis: "If you strip out higher taxes, energy bills and food prices, Britain’s inflation would be about the same as Germany’s. As these factors work their way out of the equation over the next year we can expect to see inflation coming down.
"The fall in CPI and RPI this month show that this is not a re-run of the 1970s – Britain is not going back to the days of endemic high inflation."
But not everybody is as sanguine about inflation levels. Bryn Jones, fixed income director at Rathbone Unit Trust Management, said: "Today’s inflation data is in-line with expectations, but the strength of core inflation suggests that underlying dynamics are still worrying.
"It is too early to let the guard down and be duped by headline figures. When the Bank of England releases its November inflation report we expect it to confirm market expectations of lower inflation, resulting from lower growth and output in the years ahead.
"Despite the economic logic of this argument, inflation has consistently been above expectations, even when growth is below its potential," he warned.
