Inflation fall raises prospect of more quantitative easing

Inflation unexpectedly dropped in May as food and oil prices increased at a slower rate, according to figures released this morning by the Office of National Statistics (ONS).

The ONS said the benchmark Consumer Price Inflation index (CPI) slowed to 2.8 per cent in May from three per cent in April, confounding economists who had expected an unchanged reading.

Bank of England governor Mervyn King has previously hinted that another round of quantitative easing may be on the cards and analysts say these figures will strengthen his case.

"King's comments last week indicated that more QE will soon be forthcoming and these figures might help to sway any of the more wavering members into voting for more stimulus," said Vicky Redwood, an economist at Capital Economics.