UK inflation dips to 3.1% in July

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The Office for National Statistics (ONS) has today announced Consumer Price Inflation (CPI) slipped to an annual rate of 3.1% in July – down from to 3.2% in June.

The latest figure, which was widely expected by analysts, represents the eighth consecutive month that inflation has been above the Bank of Englanda��s target of 2%.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, also fell to 4.8% in July, from 5% in June.

Inflation has remained stubbornly high over recent months and at the Bank of Englanda��s last two interest rate meetings, policymaker Andrew Sentance voted for rates to be lifted from their current historic low of 0.5% a�� where they have been since March 2009.

The CPI inflation rate is a benchmark for the Banka��s Monetary Policy Committee (MPC) but Mervyn King, the Banka��s Governor, has already dismissed fears that higher inflation would demand a significant rise in interest rates in the months ahead.

Last week, presenting the banka��s Quarterly Inflation Report, Mr King said inflation will fall below its target of 2% by the end of 2011.

The recent decision to hike VAT to 20% next year by the coalition Government will undoubtedly keep inflation higher, said the Bank.

Meanwhile, Mr King will now have to writer a letter to Chancellor George Osborne (his third this year) to explain why inflation remains above target.

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