The rate of Consumer Price Index (CPI) inflation dropped 0.6% in December, the largest fall for three years.
CPI inflation fell to 4.2% during the month, down from 4.8% in November, according to figures released today by the Office for National Statistics (ONS).
The decline was attributed to a slowdown in petrol, gas and clothing prices with the only upward pressure coming from landline and mobile phone charges.
The last time there was as a large a fall, in December 2008, VAT had been reduced.
Retail Prices Index inflation, which includes mortgage interest payments, fell from 5.2% in November to 4.8%, the largest annual fall since between May and June 2009.
The largest downward pressures affecting inflation came from petrol, oil and other fuels along with clothing and footwear.
Clothing and footwear prices dropped by 2.8% over the period with the largest fall coming in women’s outerwear; meanwhile food prices rose 1.4%.