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Wednesday 22nd of July 2009
July 14, 2009

UK inflation dips below BoE target of 2%


by Kay Murchie
”UK

The Consumer Prices Index (CPI), a key measure of inflation, has dipped below the Bank of England’s target of 2%.

The Office for National Statistics (ONS) has revealed that the CPI fell to an annual rate of 1.8% in June from 2.2% the previous month.

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

The level of 1.8% is the lowest since September 2007 and has fallen as a result of lower prices for meat, milk, non-alcoholic drinks and fruit. Furniture prices also rose at a slower rate than they did last year.

In the meantime, the Retail Price Index (RPI), which includes mortgage costs, fell an annual 1.6%, its sharpest drop since records commenced in 1948. RPI inflation is also used as a benchmark for UK wage deals.

Today’s figures were broadly in line with analysts’ forecasts.

The Bank of England 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.

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