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UK July inflation falls to 1.9% Inflation falls on food price war
(10 minutes later)
The UK's rate of inflation slowed to 1.9% in July, well below analysts' forecasts. A supermarket price war helped the UK's rate of inflation to fall to 1.9% in July, well below analysts' forecasts.
The cost of living measured by the Consumer Price Index dropped sharply from June's level of 2.4%, helped by a supermarket price war. The Consumer Price Index dropped sharply from June's level of 2.4%, raising hopes that further rises in interest rates will not be needed.
It is the first time UK inflation has fallen below the government's target of 2% since March 2006.It is the first time UK inflation has fallen below the government's target of 2% since March 2006.
The Retail Price Index, another inflation measure, fell to 3.8% in July from 4.4% the previous month. The Retail Price Index, a measure often used in wage bargaining, fell to 3.8% in July from 4.4% the previous month.
"This is a massive surprise," said Howard Archer, chief UK and European economist at Global Insight.
"Consumer price inflation fell back far more than anyone was expecting in July, including we strongly suspect the Bank of England.
"This will boost expectations that interest rates have peaked at 5.75% especially as the current turmoil in global credit and financial markets further dilutes the case for higher interest rates for now at least."