Cheaper clothing and reductions in energy bills have helped cut the UK's rate of inflation and kept it below the Bank of England's target for the second month in a row.

The Office for National Statistics (ONS) revealed that the official measure of inflation fell to 1.8% in August from 1.9% in July.

But experts fear that inflation could creep up again as oil hit another all-time high of $81 (£40.52) a barrel, which is set to lead to higher petrol prices.

Rising wheat costs have also seen the price of bread increasing, which may see the Consumer Prices Index (CPI) end its five-month run of decreases.

CPI has not been this low since last March and it has eased the pressure for further interest rate rises and raised hopes of a possible cut.

However, the data also revealed a widening gap between the official inflation rate and inflation including mortgage repayments, with the difference between the two now at a seven-year high.

The Retail Prices Index (RPI), often seen as a more representative measure as it includes mortgage costs, rose to 4.1% from 3.8% in July.

The gap between the two has not been so large since September 2000 and RPI has not risen this fast in more than a year.

The ONS said RPI hit 4.1% largely as a result of mortgage lenders passing on the July quarter-point increase in interest rates to borrowers. RPI without mortgage costs was unchanged at 2.7%.

While an immediate interest rate cut may not be on the cards, the CPI news gives the Bank of England room to consider a decrease if needed to ease the turmoil in financial markets.

Investec economist David Page said: "We do not think the headline rate stands in the way of a rate cut, if the Monetary Policy Committee decides that it is warranted to get money markets functioning again."

Economists said the Bank will be relieved at the CPI drop, which came as a surprise to many, with markets forecasting it to remain unchanged.

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