Commenting on the inflation figures published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce, said:

“UK annual CPI inflation has fallen for the first time since August 2007. But, the declines in inflation were much sharper than the markets expected.

"We predict further sharp falls in CPI inflation towards 1 per cent in the final months of 2009. The possibility of deflation at that time is now a distinct risk. Deflation would have appalling consequences for British business and for the economy as a whole so it is imperative that the Government and MPC take forceful action.

“Following these figures, it is clear that UK interest rates will be cut further, most likely to 2 per cent in early 2009. One cannot rule out rate cuts below 2 per cent later next year.”