INTEREST rate rises are now less likely after latest data revealed that inflation has fallen to its lowest level since March.

Inflation figures for September showed the annual rate had fallen by 0.2 per cent to 1.1 per cent.

The surprise drop was partly due to seasonal falls in the cost of plane and ferry tickets from high summer levels being far greater than last year's discounts, said the Office for National Statistics (ONS).

Analysts had expected the rate of inflation to remain unchanged after two consecutive falls in July and August.

Inflation is now well below the government's target of 2.0 per cent, although the Bank of England expects the figure to rise soon.

Investec economist David Page said the latest figure gave the Bank room to move on interest rates, which he believes will remain at 4.75 per cent for the rest of the year.

"They can now take their time to see what's happening in the wider economy," he said.

Slower rises in communication costs - including cheaper calls to mobile phones - added to the fall, while the price of vegetables rose by less than a year ago when supplies were affected by hot and dry growing conditions.

Small downward effects also came from hotels and restaurants, the ONS added.

But in contrast the cost of package holidays, furniture and furnishings grew at a faster rate than last year.