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Sunday 20th of June 2010
August 18, 2009    

UK inflation figures due today with further fall expected

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by Kay Murchie

The Office for National Statistics (ONS) is due to release the latest UK inflation figures today with analysts expecting a decline, albeit the rapid falls seen of late are expected to ease.

Last month, the ONS revealed that the Consumer Prices Index (CPI), a key measure of inflation, had fallen to an annual rate of 1.8% from 2.2% the previous month.

The fall meant inflation had dipped below the Bank of England’s target of 2% for the first time in almost two years.

Last month’s fall was attributed to lower prices for meat, milk, non-alcoholic drinks and fruit – compared to a year earlier when food prices were rising.

Food prices are again expected to be the main driver behind the fall, with economists predicting a 0.1% decline.

Philip Shaw of Investec Securities explains: “We think inflation is probably going to edge down to 1.7%. The key driver is food prices, which we think will be the main help for pushing inflation down.”

This time last year, CPI hit 5.2% (a 16-year high), driven by high oil and food prices.

The Bank of England’s Governor, Mervyn King, believes the CPI will fall to a level of 1% or lower over the next six months, as the economic downturn hits demand and sends prices lower.

Mr King will have to write to Chancellor Alistair Darling later this year explaining why inflation has fallen below the target.

Meanwhile, the Retail Price Index (RPI), which includes mortgage costs, is expected to see a fall to -1.8%, from -1.6% in the year to June.

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