20 Aug 2014
The Consumer Price Index (CPI) fell particularly sharply in July from 1.9% to 1.6%, according to the Office for National Statistics (ONS).
Economists had predicted a slight fall to 1.8%, which would still be less than the Bank of England (BoE) target of 2%. This drop has been attributed to summer price discounting from clothing retailers, alcohol prices, financial services and food.
A spokesperson for the Treasury said: ‘The Government’s long-term economic plan is working, with today marking the seventh consecutive month that inflation has been below the BoE’s 2% target.
‘But the effects of the great recession are still being felt and so we have taken continued action to help with the cost of living, including cutting income tax, freezing fuel duty and reducing the costs of childcare. The job is not yet done so the Government will go on making the realistic assessment of what needs to be done to deliver a brighter economic future’.
Economists have said that the lack of pressure from inflation and weak wage growth make it unlikely that the BoE will raise interests rates this year.