CPI inflation came the closest it has been to its two per cent target since November 2009 in September, the latest figures from the Office for National Statistics (ONS) reveal.
CPI now stands at 2.2 per cent, down from 2.5 per cent in August after 2011's utility bill rises fell out of the index calculation. The retail price index also fell from 2.9 per cent in August to 2.6 per cent in September.
September's rate of inflation is significant because it is used by the Government to set a number of rates and limits, including business rates, the state pension, benefits and ISA limits for the next tax year.
Despite the fact that inflation has fallen, many groups are set to feel the pinch as a direct result of the new rates. Retailers face a collective increase of £175 million on their business rate bills, if September's RPI is used to influence next April's rates, the British Retail consortium (BRC) claims.
Those claiming benefits such as Jobseeker's Allowance and income support will find that their income increases by less half the rate it did last September when CPI stood at 5.2 per cent. While Individual Savings Accounts (ISAs) face a similar fate as the limits will increase in-line with the CPI rate of 2.2 per cent.
Elsewhere, the Government's 'triple lock' guarantee looks set to come into effect for the first time as, dependant on wage figures, the State pension rate will increase by the set minimum of 2.5 per cent instead of the CPI rate of 2.2 per cent.