INSTANT VIEW: "Encouraging drop"

LONDON (Reuters) - Annual consumer price inflation tumbled to 4.5 percent in October from 5.2 percent the previous month, the Office for National Statistics said on Tuesday. The larger-than-expected drop was driven by lower fuel, transport and food costs.

BRIAN HILLIARD, CHIEF ECONOMIST, SOCIETE GENERALE

"The key driver is transport and the cost of petrol. There is no big surprise there.

"There should be a linkage between the housing market and the price of household goods, but maybe it is weaker in this cycle.

"More interest rate cuts are on the board, but the joker in the pack is the Pre-Budget Report. Maybe we will see a 2 percent or 1.5 percent cut by early spring."

JONATHAN LOYNES, CHIEF EUROPEAN ECONOMIST, CAPITAL ECONOMICS

"October's sharp fall in UK CPI inflation ... is the first step along a road that is likely to end in the first bout of deflation in the UK economy in almost half a century.

"We had been prepared for the core rate to rise in October and over the following few months as previous sharp cost increases continue to feed into the high street. But it looks like strong competitive pressures and the slowdown in demand might be preventing that from happening -- seriously bad news for retailers' profit margins."

JAMES KNIGHTLEY, ING FINANCIAL MARKETS