Unexpected fall in inflation to 4 per cent

The Consumer Prices Index dropped by 0.4% in the last month.

New figures for the cost of living have shown a surprise drop in the annual inflation rate. The Office for National Statistics figures reveal that 4.4 per cent inflation in February fell to 4 per cent in March.

City predictions of 5 per cent were proved wrong due to falling prices in the cost of food and non-alcoholic drinks - having previously risen sharply. Meanwhile the Retail Prices Index measure of inflation also dropped last month, from 5.5 to 5.3 per cent.

With the first fall in inflation since July 2010, the Bank of England are likely to be relieved of their recent pressure to increase interest rates.

However, Darren Morgan of the ONS warned over predictions of a new trend, pointing out that future food costs were unknown and transport costs would continue to rise.