Inflation fell to zero in February which it is believed will set the UK on course for a period of falling prices for the first time in half a century.

The Consumer Price Index (CPI) measure of inflation dropped after recording 0.3 per cent in January, according to the Office for National Statistics (ONS).

It was a sharper than expected fall and sets a new record low for CPI since comparable records began in 1989.

Inflation is expected to dip further in coming months. An experimental model created by the ONS suggests the last time it was negative was in March 1960, at minus 0.6 per cent.

The surprise scale of February's fall is likely to push back the expected timing of an interest rates hike, currently pencilled in for 2016, putting downward pressure on the pound.

Rates have been held at 0.5 per cent for six years but Bank of England chief economist Andy Haldane has said that, in the light of low inflation, the next move was as likely to be a cut as a hike.

Low inflation benefits consumers because it means their wages go further but policy makers fear a prolonged period of negative CPI could have damaging effects.

It is feared deflation would cause consumers to delay spending and firms to put back investment.

At the same time, debt repayments such as mortgages would become more expensive in real terms, threatening what Bank of England governor Mark Carney described as a "clear and present danger" for the UK's indebted households and businesses.

The Bank must try to return CPI towards two per cent and Mr Carney was obliged to write a letter of explanation to Chancellor George Osborne earlier this year when it fell more than one per cent off this target.

This latest fall came as food and non-alcoholic beverage prices saw a record year-on-year drop of 3.3 per cent.

They have been flat or falling for ten months, the longest stretch since 2000, amid the supermarket price war.

Motor fuels also saw a record decline, at 16.6%. A litre of petrol fell to 107p in February from 108.3p in January, down from 129p in February last year.

Chief Secretary to the Treasury Danny Alexander said: "Today's zero inflation is the right sort of price freeze, with low oil prices feeding through to prices.

"It's yet another month that sees earnings pulling ahead of prices which will be a great help to millions of families."

Following today's news, Greater Birmingham Chamber of Commerce has renewed an appeal for more investment in business in order boost economic growth.

Chamber president Greg Lowson said: "The inflation rate continues a record-breaking trend, which indicates continued low demand in the economy.

"It is important to realise in addition that oil price reductions have had a key part to play in reducing inflation. This will not continue in the long-term and so policy must not be changed on the basis of this.

"It reminds us importantly that more needs to be done to promote business investment and achieve better balanced growth."