Official figures are due to show inflation below the Bank of England's 2% target for the first time in almost two years.

Data for June is set to show the Consumer Prices Index (CPI) falling to 1.8% - its lowest level since September 2007 - compared with 2.2% the previous month.

CPI has been on a downward trend since peaking at 5.2% in September last year, but has not fallen as quickly as forecast in recent months due to the pound's weakness.

But the steep rises in oil and food prices seen 12 months earlier - especially as crude oil headed towards its 147 dollars a barrel record in July - have not been matched this year, leading to lower inflation. A year earlier, average petrol prices rose 5.3p a litre during the month to 117.6p, while food inflation was running at a record 10%.

Howard Archer of IHS Global Insight added: "Some utility prices have been trimmed recently, while the British Retail Consortium (BRC) shop price deflator indicated the upward pressure from food prices continued to ease in June.

"The BRC deflator also pointed to significant promotional and discount activity in June, reflecting the serious pressure on retailers to price competitively."

According to the Bank of England's forecasts, CPI is set to fall steeply later this year to below 1% as the recession also bears down on firms' pricing power.

This would require Governor Mervyn King to write his first letter to the Chancellor to explain why inflation is undershooting the 2% target.

The latest figures are also expected to show the broader Retail Prices Index (RPI) slipping further into negative territory, sliding to minus 1.5% to reflect falling mortgage interest payments.

Investec's David Page added: "As the predominant effect on the RPI comes from lower rates on mortgage interest payments, we would categorically assert that this is not an example of deflation. However, we believe that CPI inflation will be subdued for some time to come."