The British Retail Consortium (BRC) today called for a full, one-point cut to interest rates after revealing that food price inflation has fallen to its lowest level for five months.

Stephen Robertson, director general of the BRC, told Times Online that a rate cut would be an ideal Christmas present to millions of cash-strapped households and the best way to kick-start the faltering economy.

The BRC said the Bank of England had more enough headroom to reduce borrowing costs as food price inflation had now "peaked". The BRC's latest snapshot of the high street showed that food prices rose by 7.5 per cent in October, compared with 9.1 per cent in September.

Non-food prices rose by 0.7 per cent, down from 0.8 per cent in the previous month. Clothing and electrical prices are down year-on-year.

Mr Robertson said: “After a painful climb to the food inflation peak we’re now accelerating down the other side. Food inflation is falling. It’s falling more rapidly and we are now at the lowest rate since May."

He added: “With oil and wheat 30 per cent down on a year ago and the battle for every pound customers have to spend, retailers are rushing to pass the benefits on.

“Would it be too much to ask that oil and utility companies do the same?”

Economists widely expect the Bank of England to cut interest rates tomorrow but are split at the extent of the likely reduction. A full one-point reduction would see the cost of borrowing fall from 4.5 per cent to 3.5 per cent.

Howard Archer, chief UK and European economist at Global Insight, said the BRC shop price figures showed that inflationary pressure in the economy was easing, supporting the argument for a full, one-point cut.

He said: “Not only is the upward effect on inflation from food prices waning markedly but non-food prices moderated in October.

“This reinforces belief that inflation has peaked and is set to fall back substantially over the coming months.”

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts