Inflation falls to 2.4 per cent

17-07-2007

Inflation falls to 2.4 per cent
Inflationary fears in Britain have again subsided after the latest official figures revealed a dip in June.

According to the Office for National Statistics consumer price index (CPI) inflation, the government's target measure, fell to 2.4 per cent last month – the lowest level recorded in 2007.

In May CPI inflation was recorded at 2.5 per cent, with June's decrease in inflation preceding the Bank of England's decision to up interest rates to 5.75 per cent earlier this month.

The Bank's monetary policy committee (MPC) has adopted an inflation-combating approach since last August, with five quarter-of-a-per-cent increases in base rates recorded since then.

But while the Bank's strategy is succeeding in driving down CPI inflation, which peaked at 3.1 per cent in March, the accompanying retail price index (RPI) measure was revealed to have risen to 4.4 per cent in June.

"The main upward pressure came from mortgage interest payments – which are excluded from the CPI – with lenders passing on the remainder of this May's quarter point increase in the Bank rate," commented an ONS spokesperson on June's 0.1 percentage point rise in RPI inflation.

On CPI inflation, the ONS explained that falls in gas and electricity bills were largely responsible, with tumbling prices for digital cameras, televisions and DVDs also contributing to the fall in inflation.

"The largest upward effect on the CPI annual rate came from road fuels, where the average price recorded for petrol across June rose by around 1.2p per litre, compared with a fall of 0.9p per litre last year," a statement added.


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