Shops price war dampens inflation in UK

An aggressive supermarket price war helped push down inflation in the UK last month amid signs that the rise in the cost of living appears to have passed its peak, it was announced here Tuesday.The Consumer Price Index (CPI) rate of inflation fell to 5pct in October, the Office for National Statistics (ONS) said, slightly down on the three-year high of 5.2pct in September."Significant and widespread discounting" by supermarkets, as well as a strong harvest for some produce, saw the biggest fall in food prices for a September to October period since 1996, the ONS said.But another utility tariff hike from big six supplier of electricity continued to pile pressure on consumers, who are struggling to cope with average wage growth far below the rate of inflation. Economists said: "These figures support our view that inflation is probably past its peak, and a sharp decline can be expected during the course of 2012." Despite the slight drop, Bank of England Governor Sir Mervyn King was required to pen a letter of explanation to the Chancellor, Finance secretary George Osborne, as inflation still remains more than double the Government's 2pct target.Sir Mervyn, who issued the letter as he was formally knighted (awarded the honorary title of Sir) at Buckingham Palace today, said that without temporary factors such as the impact of the VAT increase, inflation would be below 2pct and forecast that the rate will "fall back sharply in the next six months or so".