The spectre of ‘stagflation’ edged nearer today with consumer price inflation (CPI) slowing to 0.3% last month, its lowest level since CPI records started.

Cheaper motoring costs, driven by the plummeting wholesale price of oil, were the main drag on prices.

Bank of England governor Mark Carney has said the UK could experience deflation (or dropping prices) in the next few months.

But he told journalists this wasn’t a big problem and that the Bank could take measures should it start to impact negatively on the economy.

Inflation is calculated monthly by the Office for National Statistics (ONS). It said the January figures were the lowest since it started calculating CPI in 1988.

Apart from fuel, prices also fell in common foodstuffs like milk and fruit, as well as games, toys and products associated with common hobbies.

Farmers say the falling price of milk is hurting the industry and that many are making a net loss on what they produce.

Howard Archer, chief UK and European economist at HIS Global Insight, said price stability was good news for consumers, but that ‘core inflation’, stripping out the effect of food and energy prices climbed slightly during the month.

In a statement he said: "With inflation likely to fall further and earnings growth now finally trending upwards, consumers should see appreciable improvement in their purchasing power as 2015 progresses.

He added: "The rise in core inflation highlights the fact that the UK is far from suffering generalised deflation.”