The rate of inflation fell to 0.9 per cent in August from 1.4 per cent in July, reaching its lowest level since June 2016.

The biggest single sector drop was in transport and foreign travel, which declined 2.3 per cent, with the average cost of overseas hotels and air fares slipping 7 per cent and 6.2 per cent, respectively.

The fuel and power sector decreased by 1.4 per cent, partly as a result of the fuel adjustment clause dropping 4.4 per cent.

The rent sector and the food sector dipped 0.4 and 0.3 per cent, respectively. There was no change for the clothing and footwear sector or the health and personal care sector.

However, there was a 9 per cent jump in the cost of water delivery, which was a factor in the 0.2 per cent increase in the household goods, services and supplies sector. There was also a 0.2 per cent increase in the tobacco and liquor sector.

Year-on-year the largest contributor to the inflation increase was the health and personal care sector, which was up 3.6 per cent, an increase largely driven by the cost of health insurance.

The average cost of goods and services in the Consumer Price Index between July and August, decreased 0.5 per cent. The all-items index fell to 104.9 in August. This means that the basket of goods and services that cost $100 in April 2015 now costs $104.90.

In a statement, Walton Brown, Minister for the Cabinet Office, said: “Such moderate inflation is beneficial for the economy as it encourages consumers to buy goods and services and also supports productive planning and investment.

“Delaying will mean that they would have to pay more for the same product. Consumers are further sheltered from accelerating price increases which can cause further strain in these still difficult, but improving economic conditions.”

For comparison, the inflation rate for August in the US was 2.7 per cent, in Canada it was 2.8 per cent, and in the UK it was 3.5 per cent.

The Consumer Price Index report was released by the Department of Statistics.