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Interest rate rise 'unlikely' as UK inflation falls


'Unexpected': Richard Ramsey

'Unexpected': Richard Ramsey

'Unexpected': Richard Ramsey

An unexpected fall in the rate of inflation could reduce the chances of an interest rate hike in the near future, it has been claimed.

Inflation dropped back last month as the falling price of fuel and computer games eased the pressure on household spending power.

The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure of inflation fell to 2.6% growth in June, down from 2.9% the month before.

Ulster Bank chief economist Richard Ramsey said: "This unexpected easing marked the first fall in the annual inflation rate since October 2016 and perhaps reduces the likelihood that more members of the Bank of England monetary policy committee will vote for an interest rate hike in the near future."

But Dr Esmond Birnie, economist at Ulster University, said while the decline gave the economy and UK policymakers "breathing space", in the long run the position remained "troublesome".

"Pressure to raise Bank of England interest rates will continue," he added.

While the fall was below economists' expectations of 2.9%, the cost of living remained above the Bank of England's target of 2%. The move will ease the pressure on consumers, who have seen pay squeezed by sluggish wage growth and higher inflation triggered by the Brexit-hit pound.

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"Despite the fall in the inflation rate, real wage growth is still in negative territory," Conor Lambe, economist at Danske Bank, said.