Inflation has dropped at its fastest rate for 16 years thanks to falling fuel prices, official figures have showed.

The Consumer Prices Index (CPI) - the Government's official benchmark of the cost of living - slowed to 4.5 per cent in October from 5.2 per cent the previous month.

The 0.7 per cent decline - much bigger than economists expected - is the biggest monthly drop since April 1992, the Office for National Statistics said.

As crude oil prices plummet from their record highs of mid-July, the average price of a litre of petrol fell 7.1p to 104.5p in the month to October, with diesel dropping 7p to an average 116.3p.

Although CPI is still more than double the Bank of England's 2 per cent target, the bigger-than-expected monthly fall brings home warnings of the threat of deflation - negative inflation - next year from Bank Governor Mervyn King and Prime Minister Gordon Brown.

Soaring food, energy and petrol costs have pushed the CPI to record highs this year but the latest figures also reflect falling meat prices in October, compared with 12 months earlier when costs were on the way up.

The wider measure of inflation, the Retail Prices Index, fell to 4.2 per cent in October from 5 per cent the previous month - the biggest slowdown in the annual rate since January 1993.

Falling fuel costs also contributed to the decline but the RPI also includes house prices hit by the ailing property market.

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