The news marks the third month running that CPI inflation has remained below the Bank of England's government-set target of 2% and analysts said this would make it easier for the Bank to cut interest rates in the coming months in response to the global credit squeeze and growing evidence that the economy is weakening.
"UK inflation risks remain benign and the Bank of England should have a free hand to cut rates by a quarter-point at the November monetary policy meeting," said David Brown, chief European economist at Bear Stearns in London.
Inflation is now still the lowest in over a year and a long way below the 3.1% peak it hit in March as last year's surge in oil prices fed through into higher electricity and gas bills.
But the MPC will be conscious of a fresh inflationary threat coming from oil prices which this morning set a fresh record of $86.79 a barrel. The market remained worried about tight winter oil supplies and continued tension between Turkey and Iraq.
Food had the biggest upward effect on inflation in September as the price of dairy products surged 6.3% on the month. Milk prices going up 4p a pint were the main culprit. Overall, food added 0.1 percentage points to the annual CPI rate despite an offsetting downward impact from vegetable prices.
Falling gas and electricity bills made a downward contribution to inflation, as did clothing and footwear, which rose by less than last year.
The RPI measure of inflation was also weaker than expected, falling to 3.9% from 4.1% in August. The RPIX measure, which excludes mortgage interest payments, dipped to 2.7% from 2.8% in August.
The ONS also published its Rossi index on which increases in state benefits are based. This was up 2.3% on the year in September compared with a 3.0% rise in September 2006.
Shortly before the data was published, the pound fell to a 2-1/2 year low against the euro of 69.6p. Sterling also dropped to $2.0353, from $2.0430 yesterday.
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