The UK official measure of inflation fell to 3% in April, the lowest it has been since February 2010.
The consumer prices index (CPI) fell from 3.5% in March, according to the Office for National Statistics, while the retail prices index, which includes mortgage interest payments, also fell to 3.5% from 3.6%.
The timing of Easter had a significant impact on inflation while a fall in transport, alcohol and clothing costs also helped push it down.
But the Bank of England has said CPI expects to stay above its 2% target for the next year.
Still a struggle
Research from MGM Advantage shows that despite the fall in inflation, UK households collectively need to find an extra £27 billion to maintain the same standard of living enjoyed 12 months ago.
"Inflation continues to have a big impact on our financial health. To illustrate this, goods and services costing £100 back in 1991 would have cost £176 in 2011/12, just 20 years later," explains Aston Goodey, sales and marketing director at MGM Advantage.
"Inflation has an even bigger impact on our retirement nation, who spend more of their income on food and fuel, and where we continue to see price rises above average," he adds.