Inflation fall exceeds expectations

Good spring weather helped inflation fall by 0.2% last month, boosting the likelihood of a further cut in interest rates.

The drop in the rate, excluding mortgage interest payments, to 2.2% was caused in part by dramatic drops in the prices of seasonal food, especially potatoes, after good weather in May and June boosted vegetable supply.

Chancellor Gordon Brown's target for July had been 2.5% and analysts had forecast a drop of only 0.1%.

As a result, the Bank of England will consider further reducing interest rates in a bid to rescue the recession-hit manufacturing sector.

The inflation rate was also eased by a cut in petrol prices and the impact of vehicle excise duty reductions from the March Budget.

While these factors reduced inflation, the elements pushing prices up were more expensive foreign holidays, clothing and footwear.

The headline rate of inflation, which includes mortgage interest payments, also fell. It dipped by 0.3% to 1.6%, its lowest level since November 1999.

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