Gordon Brown said food and fuel bills should start to come down next year as a fall in oil prices eased the pressure on household bills.
The Prime Minister said the sliding price of oil would be reflected in gas and electricity bills and there would be lower inflation globally. Mr Brown's claim came as the Government came under fire from economists and politicians over its approach to the looming recession.
The Tories warned that Britain was less well equipped than any equivalent economy, while the Liberal Democrats said ministers needed to start getting "very tough" with part-nationalised banks.
Chancellor Alistair Darling's plan to spend his way out of the looming recession was also described as "misguided and discredited" by a group of leading economists.
In an interview with BBC Scotland's Politics Show, Mr Brown refused to be drawn on whether there should be an interest rate cut, saying it was a matter for the Bank of England.
He said: "Now inflation is actually coming down over the next few months and that will mean that it gives scope to all the monetary authorities, including the Bank of England, round the world to make a decision about interest rates. I think over the world, you will see people responding to this lower inflation."
The PM added: "It means that after this set of gas and electricity bills, that the falling price of oil should be reflected in gas and electricity bills in the next round.
"And it also means of course that we know that food prices have been coming down so the impact on people's standards of living has been all from the oil price and from the food price ... I hope that the price of these items will come down as a result of the action that's been taken."
Official data showed that the British economy had shrunk for the first time in 16 years - and by a much greater margin than experts had predicted. The 0.5% contraction for the quarter from July to September sent share markets deep into the red and saw the pound slump to a new six-year low against the dollar.
If growth in the current quarter is also negative then the country will formally be in recession - a prospect acknowledged as "likely" by the PM on Wednesday.