Price Discounting Pushes Inflation Lower In July

Discounts by furniture stores helped to bring UK inflation lower in July, according to the latest official figures released today by the Office of National Statistics.

The data shows that the consumer prices index dipped to 1.4% in July, down from 1.6% in the previous month, leaving it well below the Bank of England’s current target of 2%.

The underlying rate of RPI inflation fell to 2.2% last month from June’s figure of 2.3%. However, the headline rate of RPI, which includes mortgage interest payments, remained unchanged at 3%.

The Bank of England increased rates to 4.75% last week in an attempt to keep a check on the inflationary pressure in the economy. Analysts expect the base rate to hit 5% by the end of the year, but say July’s inflation figures reduce the chances of another rate rise next month.

The Office of National Statistics says that price reductions by furniture stores could suggest that the booming housing market is finally slowing. Goods prices were also ‘pegged back’ by food, with prices dropping in July compared with a year ago.

Experts also said that cut-price tariffs for mobile and landline telephone services had pushed inflation lower, but recreation and cultural activities helped offset these falls. Increased cable subscription and the price of package holidays in Europe also caused some upward movement.

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