CPI inflation falls to 1.6%

Following last week's good employment news the Office for National Statistics (ONS) has announced that the Consumer Price Index (CPI) measure of UK annual inflation fell in the 12 month period to last month to 1.6% compared with 1.9% in the period ending the previous month.

This is a larger fall than forecasters had been predicting  Economists had expected CPI inflation to fall to 1.8% in July.

The ONS said consumer price inflation for the three month period to the end of July was 1.7%.

The RPI meaure of inflation which includes house prices also fell, but from 2.6% to 2.5%

It means the Bank of England is not under pressure to raise interest rates in order to keep CPI inflation at or below its target rate of 2%

Last week, Bank policymaker Professor David Miles told the BBC he believed inflation was likely to remain below target for some time to come. He added that this was a "very good news" as it meant the Bank was not "going to be pushed into raising interest rates sharply or immediately because the inflation outlook remains pretty subdued".

BBC News Business editor Kamal Ahmed wrote that
 
"Although today's inflation figures are important for their impact on rail fares, it is worth considering the broader economic picture and growing evidence that the UK is in an incredibly benign inflation cycle."

The ONS also released house price data for June which showed the rise in property values eased slightly to 10.2%, from 10.4% in May.

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