FALLING petrol and oil prices helped the annual underlying rate of inflation to ease slightly in May, data showed.

The figure, which excludes mortgage interest payments, fell 0.1 per cent to 2.9 per cent after spending the previous three months at three per cent. Inflation has now been above the Government's 2.5 per cent target for seven months in a row.

As well as cheaper oil products following the end of the Gulf War, weaker house price rises than a year ago and smaller increases in the costs of foreign holidays than last May added to the downward pressure on inflation figures.

There was also a fall in the Harmonised Index of Consumer Prices (HICP), which Chancellor Gordon Brown said last week he wanted to adopt for the Bank of England's new inflation target.

HICP stood at 1.2 per cent - the lowest since September - following a fall in the annual rate from 1.5 per cent in April.

The HICP, which is the favoured measure in the euro zone, does not include housing costs and smoothes out fluctuations. Mr Brown sees its adoption as a key part of the UK's preparations for entry to the single currency.