But the persistence of low inflation -- rare in Britain's turbulent post-war history -- means millions of the country's pensioners and welfare recipients will receive low rises based on the September inflation numbers.

That may stir discontent, with millions of pensioners already unhappy with the low interest rates they receive on their savings now inflation and interest rates have fallen towards low European levels.

Cut-throat price war erupts

Britain appears to be benefiting from global inflationary forces and also a cut-throat domestic price war breaking between rival business groups, particularly in food retailing.

Reflecting this, the major downward effect on the index last month came from a fall in price in non-seasonal food. Clothing and footwear was also cheaper on the year, falling 3 per cent.

The 2.1 per cent core inflation rate was bang in line with economists' forecasts and unchanged on the month, while a wider measure, which includes home-loans, was unchanged at 1.1 per cent.

"The Bank of England may have raised interest rates in September, but the inflation problem is not immediately obvious from these numbers ... they are a further indication that competitive pressures in the retail sector are still very strong," said David Coleman, economist at CIBC World Markets.

Borrowing costs were raised 0.25 point to 5.25 per cent in September, as a pre-emptive move by the central bank to ensure inflation is around the 2.5 per cent target in two years time __ the Bank of England's time-horizon in setting monetary policy. While low inflation brings widespread economic benefits and boosts the ruling Labour party's hard-won reputation for economic competence, it also has a sting in the tail -- low rises in nominal pay awards and state benefits. But that is simply a case of entrenched inflationary expectations having to adapt, economists said.[Prices stable, further falls in store?

Over the past five years, core inflation, which excludes housing costs, has been close to 2.5 per cent on average, but it has also been remarkably stable, with a standard deviation from this level of not much more than 0.25 per cent. By comparison, Britain entertained inflation rates as high as 25 per cent in the mid-1970s as economic excess ruled.

There may be further good news

"There is nothing to prevent core inflation heading below 2 per cent in coming months," said Jonathan Loynes, at HSBC. "These numbers clearly strengthen the argument of the "give growth a chance" camp (within the central bank's rate-setting committee)," he added.