The Consumer Price Index (CPI) fell to 4.2% in December, down 0.6% on the previous month. However, food and beverage prices were up 1.4% over the same period.
The Retail Price Index (RPI) stood at 4.8%, down from 5.2% in November 2011.
According to the Office for National Statistics, the last time there was a larger fall in CPI annual inflation was between November and December 2008, when the standard rate of VAT had been reduced.
Petrol, gas and clothing were the latest downward pressures on the change in CPI annual inflation between November and December 2011, with the only large upward pressure coming from landline and mobile phone charges.