LOWER fuel prices have pushed the rate of inflation down to a 12-year low, official statistics show.

The Consumer Price Index (CPI) measure of inflation dropped more steeply than expected from 1.3 per cent in October, the Office for National Statistics (ONS) said.

It means Bank of England governor Mark Carney only just avoids having to write to Chancellor George Osborne to explain why inflation is more than 1 per cent off its 2 per cent target.

But the continuing slide in oil prices is expected to feed through to a further drop in CPI. Mr Carney has already acknowledged that he is likely to have to write to Mr Osborne in the coming months.

CPI has not been as low since September 2002 and was last lower in June 2002. It has now been at or below the 2 per cent target for 12 months in a row.

November's figures showed food and non-alcoholic beverages fell by 1.7 per cent on last year, the steepest drop since June 2002.

Prices in this sector have been falling year on year for five months in a row - the longest such stretch since 2000 - amid fierce competition between supermarkets under pressure from Aldi and Lidl.

Motor fuel fell 5.9 per cent as average petrol prices dropped by 3p per litre over the month and diesel fell 2.9p, both steeper falls than the same month last year. It comes as oil prices have sunk to a five-year low.

Food and motor fuel prices reduced the CPI rate by 0.4 per cent.

The fall in inflation adds to hopes of a rise in real-terms wages which have lagged behind the increasing cost of living for six years.

Low inflation also gives the Bank of England leeway to leave historically low interest rates on hold at 0.5 per cent, keeping the pressure off borrowers.

But a rate below 1 per cent threatens to bring the UK uncomfortably closer to the scenario playing out in the eurozone where there are fears of a damaging deflationary spiral.

Today's figures showed that air fares fell more steeply month on month than a year ago, while second-hand cars were also cheaper.

Howard Archer, of IHS Global Insight, said the fall in inflation gave a boost to consumer spending power, cheering voters ahead of the May general election.

He added that, while deflation did not look a serious risk, a prolonged period of low inflation "could make the Bank of England increasingly wary about raising interest rates at all in 2015".

Ben Brettell, senior economist at stockbrokers Hargreaves Lansdown, said: "Given the weakening growth outlook and the absence of inflationary pressure, it is difficult to see why the Bank of England would even consider higher interest rates at present.

"I fully expect them to remain on hold until at least Q4 next year, and quite possibly into 2016."