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| UK inflation dips to 1.8% in June | UK inflation dips to 1.8% in June |
| (30 minutes later) | |
| A key measure of inflation has fallen below the Bank of England's target rate of 2% for the first time since 2007. | A key measure of inflation has fallen below the Bank of England's target rate of 2% for the first time since 2007. |
| Lower food prices caused the Consumer Prices Index (CPI) to drop to an annual rate of 1.8% in June from 2.2% in May, official statistics showed. | Lower food prices caused the Consumer Prices Index (CPI) to drop to an annual rate of 1.8% in June from 2.2% in May, official statistics showed. |
| The Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments and housing costs, fell to -1.6% from -1.1%. | The Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments and housing costs, fell to -1.6% from -1.1%. |
| The RPI is now at its lowest since ONS records started in 1948. | The RPI is now at its lowest since ONS records started in 1948. |
| The Bank of England aims to keep inflation at 2% to maintain price stability and more broadly, economic stability. | |
| Consensus | Consensus |
| Lower prices for meat, milk and fruit last month were the main reason for the fall in inflation. | Lower prices for meat, milk and fruit last month were the main reason for the fall in inflation. |
| INFLATION CALCULATOR Check your personal inflation rate | INFLATION CALCULATOR Check your personal inflation rate |
| "A significant downward effect also came from furniture prices, which rose by less than last year," the Office for National Statistics said. | "A significant downward effect also came from furniture prices, which rose by less than last year," the Office for National Statistics said. |
| It also pointed to a large upward pressure on the CPI rate from the recreation and culture sector, with computer games in particular rising by more than a year ago. | It also pointed to a large upward pressure on the CPI rate from the recreation and culture sector, with computer games in particular rising by more than a year ago. |
| The CPI is far below what it was last September, when the rate hit 5.2% because of high oil and food prices. | The CPI is far below what it was last September, when the rate hit 5.2% because of high oil and food prices. |
| The Bank of England is now predicting CPI will fall below 1% this year, as the downturn hits demand and sends prices lower. | The Bank of England is now predicting CPI will fall below 1% this year, as the downturn hits demand and sends prices lower. |
| "The figures are bang on consensus," said economist Philip Shaw of Investec. | "The figures are bang on consensus," said economist Philip Shaw of Investec. |
| ECONOMIC VIEWPOINT By Nils Blythe, BBC economics correspondent The sharp fall in inflation is hardly a surprise. In many ways the bigger surprise is that the consumer prices index (CPI) has taken so long to fall below the official target rate of 2%. Recessions bear down on inflation by making businesses compete hard on prices. And this is a very severe recession. The question now is how much lower inflation will fall. The Bank of England thinks it is likely that CPI will fall close to zero in the latter part of this year, but will probably avoid actually turning negative. Inflation will then pick up a little, especially as the temporary cut in VAT is reversed. But the Bank's central projection is for CPI to stay below the target rate of 2% for all of next year and into 2011. UK recession tracker: Inflation | |
| "We note that food prices fell back on the month and the increase in petrol prices was a little less than we'd factored in." | "We note that food prices fell back on the month and the increase in petrol prices was a little less than we'd factored in." |
| He added that the RPI measure was negative because of "aggressive" cuts in interest rates since last autumn. | He added that the RPI measure was negative because of "aggressive" cuts in interest rates since last autumn. |
| Interest rates are now at a record low of 0.5%. | Interest rates are now at a record low of 0.5%. |
| "To call this a period of deflation would be totally wrong," he said | "To call this a period of deflation would be totally wrong," he said |
| But not everyone agreed. | But not everyone agreed. |
| David Kern, head economist at the British Chambers of Commerce said: "The figures confirm the BCC's assessment that in the short-term, the main policy priority must be countering the risks posed by recession and deflation". | David Kern, head economist at the British Chambers of Commerce said: "The figures confirm the BCC's assessment that in the short-term, the main policy priority must be countering the risks posed by recession and deflation". |
| In the near future the BBC is urging the Bank of England to expand the scale of quantitative easing well beyond £125bn. | In the near future the BBC is urging the Bank of England to expand the scale of quantitative easing well beyond £125bn. |
| Having lowered interest rates sharply the government has aimed to increase the amount of money circulating to boost the economy, though quantitative easing. | Having lowered interest rates sharply the government has aimed to increase the amount of money circulating to boost the economy, though quantitative easing. |
| Stephen Bell, of hedge fund GLC, said: "Underlying inflation will remain low for some time, which is good news for home [loan] borrowers." | Stephen Bell, of hedge fund GLC, said: "Underlying inflation will remain low for some time, which is good news for home [loan] borrowers." |
| While it will be a "long hard struggle to recovery" he said the positive message was that the UK economy was recovering faster than other economies. | While it will be a "long hard struggle to recovery" he said the positive message was that the UK economy was recovering faster than other economies. |