UK inflation edges down to 2.8%


Inflation fell slightly in the UK during July, the latest figures from the Office for National Statistics show.

The consumer prices index rose by 2.8 per cent in July, down from the 2.9 per cent recorded in June. The fall in inflation was driven by declines in the price of air fares, plus movements in the recreation and clothing sectors.

The falls were partially offset by prices rises in petrol and diesel.

In addition, the retail prices index – which is no longer an official national statistic – fell from 3.3 per cent to 3.1 per cent.

Investors are closely watching inflation data after Bank of England governor Mark Carney said he would not consider lifting interest rates until the unemployment rate falls to 7 per cent – unless the outlook for inflation deteriorates or risks to financial stability emerge.

IHS Global Insight chief UK and European economist Howard Archer says: “Looking ahead, consumer price inflation may yet touch 3 per cent in the near term, but it should start heading gradually down towards the end of the year.”

Capital Economics UK economist Martin Beck says: “Although there are growing signs of economic recovery, we think the degree of slack in the economy will help push down CPI inflation close to the [monetary policy committee] 2 per cent target by the end of the year.

“The rationale for the forward guidance announced by the MPC last week just got a bit stronger.”