There has been a sharp deceleration in the rate of inflation in the country.

Headline inflation fell to 2.7 per cent in October from 4.9 per cent in September, the Central Bank said yesterday. It is the lowest rate since January 2003, the bank said.

Food inflation, the main driver of the headline inflation rate, slowed to 3.5 per cent, in the 12 months to October, from 6.8 per cent in the previous month.

This was the first instance food inflation had dipped below four per cent since late 1999.

Slower price increases were recorded for meat, oils and fats, fruits, sugar and confectionery compared to September, the bank said.

Core inflation, which excludes food prices, also slowed in October. On a year-on-year basis, the rate of core inflation fell to 2.2 per cent from 3.9 per cent in September.

Inflation on recreation, culture, clothing and footwear all declined in October.

The slowdown did not apply to health services, alcoholic beverages or tobacco products.

’The decline in economic activity and the delayed impact of lower international commodity prices, particularly of food items, have contributed to the sharp fall in the inflation rate,’ the Central Bank said.

In the more subdued economic environment, private sector credit by the consolidated financial system contracted by 0.4 per cent, the first time in seven years-compared to growth of 11.8 per cent in the same period one year ago.

Against the background of a continuing contraction in economic activity and declining credit demand, the Central Bank has lowered its main policy rate or ’repo’ by 50 basis points to 5.75 per cent.