Last month, policymakers revealed that unemployment was falling and the economy growing faster than predicted in its previous quarterly inflation report, so there is an expectation that these forecasts will be upgraded.
Inflation has exceeded the BoE’s 2pc target since December 2009, in contrast to the euro zone where a sharp fall in inflation to 0.7pc in October prompted the European Central Bank to cut borrowing costs to a record low last week.
In March, George Osborne, Chancellor, changed the bank’s mandate to clarify that it could take an extended period to return inflation to target if to do otherwise would significantly hurt growth.
Since then Britain’s economy has expanded rapidly and grew by 0.8pc in the three months to September. But total output is still below its 2008 peak, in contrast to almost all other major economies.
The figures come 24 hours before the Bank of England publishes its closely-watched Inflation Report, which is designed to give an indication of the future path of interest rates, currently at an historic low of 0.5pc.
Tuesday’s data are likely to strengthen economists’ expectations that the central bank will revise down its short-run forecasts for inflation, as well as raising its growth forecast and bringing forward the date at which it expects unemployment to hit 7pc.
The ONS said October’s fall in inflation was driven by the biggest fall in transport prices since July 2009 as well as favourable comparisons to a year earlier, when the first and most significant of several annual rises in university tuition fees took effect.
An underlying measure of inflation, which strips out increases in energy, food, alcohol and tobacco, rose by just 1.7 percent, its smallest increase since September 2009.
However some economists see upward pressure on inflation over the next few months, when the impact of recently announced prices rises for household heating gas and electricity take effect.
Data also released by the ONS on Tuesday showed that factory gate prices rose by 0.8pc, their slowest since October 2009, compared to economists’ predictions of a 1pc increase on the year.
House prices across Britain rose by 3.8pc, the ONS said. This compares to annual increases of 6.9pc and 5.8pc recently reported for October by two of Britain’s biggest mortgage lenders, Halifax and Nationwide.
Increases were concentrated in London, where prices are 9.4pc higher than a year earlier, while in the rest of Britain they were just 2.1pc higher
A survey published overnight by the Royal Institution of Chartered Surveyors showed house prices hit an 11-year high in October as new British government incentives to support the housing market boosted the number of would-be home-buyers.
Sources: PA, Reuters. Edited by Denise Roland