July UK inflation slows

UK inflation eased to 3.1% in July from 3.2% in June, the third month in a row that prices have risen more slowly.

However, the Consumer Prices Index (CPI) is still well above the Bank of England’s 2% target rate.

The Retail Prices Index (RPI) slowed to 4.8% from 5% in June, the Office for National Statistics (ONS) said.

The governor of the Bank of England has written to the chancellor of the exchequer explaining why inflation is still above target.

In his letter, Mervyn King said that although the Bank’s Monetary Policy Committee (MPC) had been “surprised” by the recent strength of inflation, this was largely due to “temporary” factors.

These included the return of VAT in January to 17.5% following the reduction to 15% during the recession, past rises in oil prices and higher import prices as a result of the depreciation in the pound since the middle of 2007.

BBC

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