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UK inflation rate eases to 1.8% UK inflation rate eases to 1.8%
(about 1 hour later)
UK inflation fell slightly in August, helped by cheaper energy bills and lower clothing costs.UK inflation fell slightly in August, helped by cheaper energy bills and lower clothing costs.
The Consumer Prices Index (CPI) fell to 1.8% in August - its lowest level in more than a year - from 1.9% in July.The Consumer Prices Index (CPI) fell to 1.8% in August - its lowest level in more than a year - from 1.9% in July.
The rate is below the government's 2% target, and the fall is likely to add to expectations that UK interest rates have peaked.The rate is below the government's 2% target, and the fall is likely to add to expectations that UK interest rates have peaked.
However, the RPI inflation measure - which includes mortgage interest repayments - rose to 4.1% from 3.8%.However, the RPI inflation measure - which includes mortgage interest repayments - rose to 4.1% from 3.8%.
The Bank of England has raised interest rates five times since August 2006 in an effort to cool inflation in the economy. The increase in the RPI reflects higher mortgage interest payments which have followed five rate rises by the Bank of England since August 2006.
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Analysts said the latest inflation figures would be encouraging for the Bank of England, and made it more likely that there would be no more interest rate rises in the current cycle. Analysts said the latest inflation figures would be encouraging for the Bank of England, and increased the likelihood that there would be no more interest rate rises in the current cycle.
The current turmoil in the financial markets has also made the Bank reluctant to raise interest rates in the next few months, experts belive. The Bank of England will closely monitor how the credit crunch and Northern Rock crisis is impacting on the real economy Howard Archer, Global Insight
"I don't think we are going to get a rate cut this year, but this does give the Bank some leeway," said Ross Walker, an economist at RBS. The current turmoil in the financial markets has also made the Bank reluctant to raise interest rates in the next few months, experts believe.
"If they need to cut rates, this helps." "I don't think we are going to get a rate cut this year, but this does give the Bank some leeway," said Ross Walker, an economist at RBS. "If they need to cut rates, this helps."
Experts said the Bank was unlikely to cut rates in the short-term given that high oil prices and possible future rises in food prices could still revive inflationary pressures.
"We expect the Bank of England to remain firmly in 'wait and see' mode for the time being, although we do anticipate that the next move in interest rates will be downwards," said Howard Archer at Global Insight.
"The Bank of England will closely monitor how the credit crunch and Northern Rock crisis is impacting on the real economy and affecting the outlook for growth and inflation."
The fall in CPI inflation was helped by some mortgage lenders cutting the levels of their mortgage exit fees.The fall in CPI inflation was helped by some mortgage lenders cutting the levels of their mortgage exit fees.
Cheaper gas and electricity bills also helped to keep inflation under control as a number of advertised reductions from major energy suppliers came into effect. Cheaper gas and electricity bills also helped to keep inflation under control as a number of price cuts from major energy suppliers came into effect.