Belfast Telegraph

Lower fuel prices sees UK inflation rate dip

By Roger Baird

Inflation slowed to 1.5% last month as consumers benefited from lower petrol prices and the ongoing supermarket price war.

The figure, which matches the four-and-a-half-year low seen in May, means CPI inflation has been below its target of 2% for eight months in a row – the longest such run since 2005.

Falling petrol prices and lower food and non-alcoholic drinks provided the largest downward contributions to the 0.1% decline in the inflation rate, the Office for National Statistics (ONS) said.

The figure may ease pressure on Bank of England policy-makers as they consider when to hike interest rates which have been at the historic low of 0.5% for more than five years. Samuel Tombs, senior UK economist at Capital Economics, said stable energy bills, lower import prices and weak wage growth will enable inflation to fall to as low as 1% by the end of this year and remain weak in 2015.

He said: "Although the low inflation outlook is unlikely to prevent the bank's monetary policy committee from raising interest rates entirely over the next couple of years, it should limit the speed at which they rise."

Food and drink prices fell by 0.2% between July and August and are now 1.1% lower than a year earlier – the biggest figure since June 2002.

There was also downward pressure on the prices of furniture and household equipment.

These falls offset rises among clothing and footwear, which jumped by 2.6% between July and August. Alcohol and tobacco also rose 1% between the same period.

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