UK inflation slows to lowest since Sept 2007
Britain's inflation rate slowed to an annual rate of 1.8 percent in June, falling below the official target for the first time in 20 months, official data showed Tuesday.
By Agencies |
LONDON: Britain's inflation rate slowed to an annual rate of 1.8 percent in June, falling below the official target for the first time in 20 months, official data showed Tuesday.
It was the lowest level for the consumer price index since September 2007, when it was last below the government 2 percent target.
The CPI rate has fallen every month except once since September's inflation peak of 5.2 per cent.
Falling food prices, particularly for meat, milk and fruit, were the main factor behind the fall in June. A year earlier, food costs were rising sharply, the Office for National Statistics said.
The retail price index _ which includes housing costs such as mortgage interest payments and council tax and is used in wage negotiations _ fell to minus 1.6 percent, the lowest since records began in 1948. Falling mortgage rates were a key factor in dragging the index into negative territory; the Bank of England's key lending rate is now 0.5 percent, compared to 5 percent a year ago.
``This is no one-off,'' said Jonathan Loynes, chief European economist at Capital Economics. Given the recent slide in wholesale food prices and lower import prices, ``further falls in food CPI inflation are likely over the coming months,'' he said.
``A sharp fall in furniture and household goods inflation suggests that the weakness of demand and activity could be starting to bear down on prices in some key high street sectors,'' Loynes added. ``But that the bulk of the disinflationary effects of the deep recession in the economy have yet to be seen.''
The Bank of England has forecast that the annual consumer price inflation rate is likely to fall below 1 percent later this year.
It was the lowest level for the consumer price index since September 2007, when it was last below the government 2 percent target.
The CPI rate has fallen every month except once since September's inflation peak of 5.2 per cent.
Falling food prices, particularly for meat, milk and fruit, were the main factor behind the fall in June. A year earlier, food costs were rising sharply, the Office for National Statistics said.
The retail price index _ which includes housing costs such as mortgage interest payments and council tax and is used in wage negotiations _ fell to minus 1.6 percent, the lowest since records began in 1948. Falling mortgage rates were a key factor in dragging the index into negative territory; the Bank of England's key lending rate is now 0.5 percent, compared to 5 percent a year ago.
``This is no one-off,'' said Jonathan Loynes, chief European economist at Capital Economics. Given the recent slide in wholesale food prices and lower import prices, ``further falls in food CPI inflation are likely over the coming months,'' he said.
ADVERTISEMENT
``A sharp fall in furniture and household goods inflation suggests that the weakness of demand and activity could be starting to bear down on prices in some key high street sectors,'' Loynes added. ``But that the bulk of the disinflationary effects of the deep recession in the economy have yet to be seen.''
The Bank of England has forecast that the annual consumer price inflation rate is likely to fall below 1 percent later this year.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
