Asda today said this Christmas would be the “most aggressive on price in a decade” as it announced £150m in potential customer savings.

The UK’s second-largest supermarket chain announced sales excluding VAT and petrol were up 5.6% in the three months to September 30 on last year as volumes rose.

This was a slowdown from the previous quarter’s 7.2% rise “entirely” because of falling food inflation, which the firm said had already almost disappeared.

Asda, which is owned by US giant Wal-Mart, said it expects food inflation to remain very low into the Christmas period, helping its planned reductions.

The firm is also running a series of themed events in the run up to festivities, including an electronics sale this week.

Chief financial officer Judith McKenna said she expected customers to be attracted to “practical” presents as they endure a second recessionary Christmas.

She said expectations of future tax hikes and public sector job cuts continued to weigh on consumer optimism.

“Customers tell us they continue to be under pressure and they remain cautious,” she added.

“People are reluctant to spend any cash they have.”

Ms McKenna said that she was “not really interested” in launching a price war among the supermarkets.