Inflation is today set to drop below 1 per cent for the first time since June 2002 on the back of the falling price of food and fuel. The figures for December, to be published at 9.30am, will be hailed by ministers as evidence that the squeeze on family finances is finally coming to an end, with wages rising faster than prices. The fall in inflation will fuel speculation that interest rates could stay at 0.5 per cent until late this year or even until next year in a boost for millions of borrowers. Scroll down for video . Composing... Mark Carney, governor of the Bank of England, must write a letter to Chancellor George Osborne explaining why inflation has strayed more than one percentage point from the 2 per cent target . Bank of England governor Mark Carney must write an open letter to Chancellor George Osborne when inflation moves more than one percentage point away from the 2 per cent target. So this week he will be forced to explain why the figure is so low – paving the way for interest rates to stay at rock bottom for longer than expected. Howard Archer, chief UK economist at IHS Global Insight, said: ‘Inflation is likely to have been brought down further in December primarily by a marked fall in petrol prices … the ongoing supermarket pricing war should have continued to limit prices.’ He added: ‘With oil prices hitting new lows in January and likely to remain weak for a prolonged period and with the supermarket pricing war continuing, inflation could very well get down near to 0.5 per cent in the early months of 2015. ‘The government will be hoping that very low inflation and improving earnings growth improves its popularity in the run-up to May’s general election.’ The Bank set interest rates at 0.5 per cent for a 71st month in a row last week – prolonging the agony of low returns for savers but providing further comfort to over-stretched borrowers. Over the summer, it was thought the Bank could raise rates for the first time since 2007 before the end of 2014 or in early 2015. Happy time at the supermarket: The figures for December will be hailed by ministers as evidence that the squeeze on family finances is finally coming to an end, with wages rising faster than prices . But the sharp fall in inflation, the slowdown in the UK economy, and worries about the outlook in Europe and around the world, has dampened expectations of an early rate hike. Calum Bennie, savings expert at Scottish Friendly, said: ‘You might have better luck picking the winner of the Grand National than you would predicting when interest rates might change. ‘The Bank of England seems content to hunker down and sit on interest rates, possibly until later this year or even early 2016.’ Chris Williamson, chief economist at Markit, said: ‘Expectations about an early hike in interest rates by the Bank of England have cooled. UK policymakers will be in no hurry to start raising interest rates.'
Bank of England governor Mark Carney must now write to the Chancellor .
Fall in inflation fuels speculation that interest rates will stay low for longer .
Analysts say drop in petrol prices would have helped force down inflation .
Inflation is today set to drop below 1 per cent for the first time since June 2002 on the back of the falling price of food and fuel. The figures for December, to be published at 9.30am, will be hailed by ministers as evidence that the squeeze on family finances is finally coming to an end, with wages rising faster than prices. The fall in inflation will fuel speculation that interest rates could stay at 0.5 per cent until late this year or even until next year in a boost for millions of borrowers. Scroll down for video . Composing... Mark Carney, governor of the Bank of England, must write a letter to Chancellor George Osborne explaining why inflation has strayed more than one percentage point from the 2 per cent target . Bank of England governor Mark Carney must write an open letter to Chancellor George Osborne when inflation moves more than one percentage point away from the 2 per cent target. So this week he will be forced to explain why the figure is so low – paving the way for interest rates to stay at rock bottom for longer than expected. Howard Archer, chief UK economist at IHS Global Insight, said: ‘Inflation is likely to have been brought down further in December primarily by a marked fall in petrol prices … the ongoing supermarket pricing war should have continued to limit prices.’ He added: ‘With oil prices hitting new lows in January and likely to remain weak for a prolonged period and with the supermarket pricing war continuing, inflation could very well get down near to 0.5 per cent in the early months of 2015. ‘The government will be hoping that very low inflation and improving earnings growth improves its popularity in the run-up to May’s general election.’ The Bank set interest rates at 0.5 per cent for a 71st month in a row last week – prolonging the agony of low returns for savers but providing further comfort to over-stretched borrowers. Over the summer, it was thought the Bank could raise rates for the first time since 2007 before the end of 2014 or in early 2015. Happy time at the supermarket: The figures for December will be hailed by ministers as evidence that the squeeze on family finances is finally coming to an end, with wages rising faster than prices . But the sharp fall in inflation, the slowdown in the UK economy, and worries about the outlook in Europe and around the world, has dampened expectations of an early rate hike. Calum Bennie, savings expert at Scottish Friendly, said: ‘You might have better luck picking the winner of the Grand National than you would predicting when interest rates might change. ‘The Bank of England seems content to hunker down and sit on interest rates, possibly until later this year or even early 2016.’ Chris Williamson, chief economist at Markit, said: ‘Expectations about an early hike in interest rates by the Bank of England have cooled. UK policymakers will be in no hurry to start raising interest rates.'
inflation will fuel speculation that interest England, must write a letter to Chancellor George target . Bank of England governor Mark Carney rates to stay at rock bottom for longer than primarily by a marked fall in petrol prices … the in interest rates by the Bank of England have