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UK inflation rate stays at 1.8% | UK inflation rate stays at 1.8% |
(about 2 hours later) | |
A key measure of inflation in the UK has unexpectedly remained at 1.8%. | A key measure of inflation in the UK has unexpectedly remained at 1.8%. |
Economists had expected the Consumer Prices Index (CPI) to decline to 1.5% in July. | Economists had expected the Consumer Prices Index (CPI) to decline to 1.5% in July. |
The Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments, also unexpectedly rose to -1.4%, from -1.6%. | The Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments, also unexpectedly rose to -1.4%, from -1.6%. |
The RPI rate has fallen sharply over the past year as the Bank of England slashed interest rates to a record low amid a recession. | The RPI rate has fallen sharply over the past year as the Bank of England slashed interest rates to a record low amid a recession. |
The figures suggest that deflationary pressures on the economy may be easing. | The figures suggest that deflationary pressures on the economy may be easing. |
Train fares | Train fares |
The RPI rate had fallen in June to its lowest since the records started in 1948, according to the ONS. | The RPI rate had fallen in June to its lowest since the records started in 1948, according to the ONS. |
INFLATION CALCULATOR Check your personal inflation rate class="" href="/2/hi/business/8206942.stm">Train fares set to decline in 2010 | |
Among other things, the RPI should mean lower season ticket prices for trains next year. | Among other things, the RPI should mean lower season ticket prices for trains next year. |
Annual rail fare rises are pegged to the RPI figure in July of the prior year, plus an average of 1%. | Annual rail fare rises are pegged to the RPI figure in July of the prior year, plus an average of 1%. |
So a £2,000 season ticket would fall by £8, based on an expected cut in prices of 0.4%. | So a £2,000 season ticket would fall by £8, based on an expected cut in prices of 0.4%. |
Last July, the RPI was 5%, meaning that rail prices this year rose by 6%. | Last July, the RPI was 5%, meaning that rail prices this year rose by 6%. |
Below target | Below target |
Prices of recreational devices, such as computer games, DVDs and CDs, rose the most in the month, according to the Office for National Statistics (ONS). | Prices of recreational devices, such as computer games, DVDs and CDs, rose the most in the month, according to the Office for National Statistics (ONS). |
There was also upward pressure from furniture prices because of less aggressive discounting in the July sales. | There was also upward pressure from furniture prices because of less aggressive discounting in the July sales. |
The chief downward impact on prices came from food and non-alcoholic drink prices. | The chief downward impact on prices came from food and non-alcoholic drink prices. |
We expect that this halt in the downward trend in inflation will prove to be only temporary Vicky Redwood, Capital Economics | |
The drop to 1.8% in June was the first time in two years that CPI rate - the government's preferred measure of inflation - fell below the Bank of England's 2% target rate. | The drop to 1.8% in June was the first time in two years that CPI rate - the government's preferred measure of inflation - fell below the Bank of England's 2% target rate. |
The Bank aims to keep inflation at 2% to maintain price stability and more broadly, economic stability. | The Bank aims to keep inflation at 2% to maintain price stability and more broadly, economic stability. |
Earlier this month, the Bank said it was "more likely than not" that the annual rate of growth in consumer prices would temporarily fall below 1% in the autumn and stay low until the end of its two-year forecast period. | Earlier this month, the Bank said it was "more likely than not" that the annual rate of growth in consumer prices would temporarily fall below 1% in the autumn and stay low until the end of its two-year forecast period. |
"With the amount of spare capacity in the economy still building, core price pressures should soon start to ease," said Vicky Redwood, an economist at Capital Economics. | "With the amount of spare capacity in the economy still building, core price pressures should soon start to ease," said Vicky Redwood, an economist at Capital Economics. |
"Accordingly, we expect that this halt in the downward trend in inflation will prove to be only temporary. | "Accordingly, we expect that this halt in the downward trend in inflation will prove to be only temporary. |
"Indeed, these figures do little to alter our view that a prolonged period of low inflation or even deflation remains a serious risk," she added. | "Indeed, these figures do little to alter our view that a prolonged period of low inflation or even deflation remains a serious risk," she added. |