UK NEWS
INFLATION STICKS AT 1.8%
LATEST FIGURES: Inflation is still short of the Bank of England's 2% target
By Emily Garnham for express.co.uk
INFLATION remained unchanged in July at 1.8 per cent, official figures showed today.
Despite predictions from economists, who said consumer prices would fall, the Consumer Prices Index (CPI) stayed the same and below the Bank of England's 2 per cent target.
Price hikes in computer games, toys and DVDs had an upward effect on CPI, which has seen a downward trend since peaking at 5.2 per cent in September last year.
The Retail Prices Index (RPI), which measures housing costs such as mortgage payments and council tax, also went against economists' predictions to rise from -1.6 per cent to -1.4 per cent in June.
Despite the rise, RPI - which is used to calculate rail fares - remained in negative territory, according to the Office for National Statistics (ONS).
It means rail commuters will get a welcome 0.4 per cent dip in season ticket prices in the new year. But the decrease will only affect around 40 per cent of total fares.
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These figures do little to alter our view that a prolonged period of low inflation or even deflation remains a serious risk.
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Vicky Redwood, Capital Economics
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And consumer watchdogs are concerned that unregulated fares, not linked to RPI inflation, could be hiked up compensate for the loss of revenue from regulated fares.
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RPI has fallen sharply over the past year, dragged down by record low interest rates of 0.5 per cent.
But the measure has been pushed up principally because of motoring costs, including vehicle purchase, car tax and insurance.
There was a large downward contribution from petrol as the average price of filling up at the pumps rose by less than a year ago when steep climbs in crude oil prices reached their peak in July’s 147 dollars a barrel record.
Food and non-alcoholic beverages weighed heavily on both RPI and CPI as they continued to fall this year, compared to price hikes in 2008.
Bank of England Governor Mervyn King has warned he expects to have to write to Chancellor Alistair Darling later this year explaining why inflation was more than a percentage point below target.
The Bank wants to keep inflation at 2 per cent to maintain prices and, in the longer term, economic stability.
Vicky Redwood, an economist at Capital Economics, said UK inflation had been slower to fall than in other major economies.
However, she added: “We expect that this halt in the downward trend in inflation will prove to be only temporary.
“These figures do little to alter our view that a prolonged period of low inflation or even deflation remains a serious risk.
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ANYONE TOLD......
18.08.09, 5:21pm
Tesco, Asda, Morrisons, Sainburys etc ?
Just wait for the inflation figure to go up at the next council tax review !
• Posted by: KarlH • Report Comment
INFLATION STICKS AT 1.8%
18.08.09, 4:59pm
OK. but for those of us on pensions in Gordon's fair and bountious land this is still 1.8% too much
• Posted by: ricardo • Report Comment
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