Inflation falls below two per cent
Jul 14 2009
Inflation has fallen below the Bank of England’s target rate of two per cent for the first time since 2007.
The Consumer Price Index (CPI) fell to 1.8 per cent in June from 2.2 per cent in May, with the biggest downward pressures coming from a drop in the prices of food, non-alcoholic drinks and household equipment.
The Retail Price Index (RPI) also dropped further into deflation from -1.1 per cent to -1.6 per cent due to steep fall in mortgage payments.
Charles Davis, economist at the Centre for Economics and Business Research, says: ‘These figures aren’t a surprise and are actually bang in line with expectations. For business, they show that demand remains relatively weak as does bank lending.’
David Kern, chief economist at the British Chambers of Commerce (BCC), says: ‘The figures confirm the BCC’s assessment that in the short-term, the main policy priority must be countering the risks posed by recession and deflation. In the near future we urge the Bank of England to increase the scale of quantitative easing well beyond £125 billion.’