The cost of living is expected to have fallen for the first month in more than a year, thanks largely to cheaper petrol prices.

Inflation figures for October are set to show a fall after the Consumer Prices Index (CPI) - the official measure of the cost of living - reached a record high of 5.2% in September following the latest round of rising energy costs during the summer.

But the CPI is widely predicted by economists to fall back to around 4.8%, mainly due to the easing pressure on motorists at the petrol pump.

October is likely to be the first month of slackening inflation rates since August last year after months of soaring food, oil and energy costs.

According to Investec economist David Page, other base effects set to reduce inflation will be the contrast with the big jump in mortgage arrangement fees seen in October last year in the wake of the credit crunch.

"October looks likely to post something of a reversal," Mr Page said, although he remains wary of the potential inflationary impact of the pound's sharp recent fall against the dollar and the euro.

After wrestling with rising inflation for a year, the prospect of deflation is now the major threat to rate-setters as prices fall in a looming recession.

More interest rate cuts are set to come on top of the bold 1.5% slash to 3% two weeks ago as the Bank of England's latest forecasts show it undershooting its 2% inflation target by more than 1% if rates are held at current levels.

Bank Governor Mervyn King last week said it was "very likely" that the wider Retail Prices Index measure will turn negative next year as mortgage payments fall.

Deflation is a serious threat because consumers and businesses can defer spending in expectation of falling prices, hitting the economy.

Prime Minister Gordon Brown told the Commons on Monday: "Next year, the problem is deflation and the problem of inflation close to zero."

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