Inflation fell to 2.8% in July, and is likely to be the "start of a sustained drop", according to Capital Economics.
The Office for National Statistics said air fare, clothing and recreation were the largest contributors to the 0.1% fall in the consumer prices index (CPI), which ran at 2.9% in June, while a rise in petrol and diesel prices offset it.
"Martin Beck, UK economist at Capital Economics, said it was "particularly encouraging" that the core rate of inflation, which is a more long-term measure, fell from 2.3% to 2%.
Beck added that signs of economic recovery and subdued price pressure indicate "further falls in inflation ahead".
But Aston Goodey, director at MGM Advantage, said the current rate of inflation will still leave UK households struggling to find at extra £18 billion a year in total to enjoy the same standard of living as they did the same time last year.
"Many people are struggling, feeling the constant pressure to find the extra money to trying to find savings elsewhere, especially when wage growth is subdued," he added, pointing to price increases in essentials such as energy, fuel and food.
This article was written for our sister website Money Observer