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2012-09-18 11:43:45
The annual rate of inflation in the UK, as measured by the Consumer Prices
Index (CPI), fell back to 2.5% in August from 2.6% the month before.
The Retail Prices Index (RPI) inflation measure, which includes housing costs,
fell to 2.9% from 3.2%, the Office for National Statistics (ONS) said.
The fall was partly due to smaller rises in furniture and gas prices.
The CPI inflation rate rose in July, but has been falling steadily since
peaking at 5.2% in September last year.
The latest figures show that prices were 2.5% higher in August than they were
in the same month last year.
Further falls?
The ONS said smaller rises in the price of clothing had also contributed to the
fall in the rate of inflation - the price rises recorded in July had been the
largest on record.
This helped to offset bigger rises in the price of petrol and a rise in the
cost of rail travel, which had fallen a year earlier.
Analysts had expected the CPI rate to fall following the rise to 2.6% in July,
which was also down to rising air fares and an early end to sales due to the
Olympics.
ONS Director Richard Campbell: "Important to look at the general inflation
trend"
They said they now expected the inflation rate to continue to fall towards the
Bank of England target of 2%.
James Knightley from ING told the BBC that, despite upward pressure from
commodity, fuel and food prices, he expected inflation to be "a little bit
lower by the end of the year".
Peter Dixon from Commerzbank agreed: "From here on we should be looking at
lower rates for some time".
More stimulus?
Analysts suggested that the falling inflation rate eased concerns that the
Bank's policy of pumping money into the economy to stimulate demand - known as
quantitative easing (QE) - could lead to inflation picking up.
The UK economy has contracted for the past three quarters and the Bank
announced another 50bn of QE in July, taking the total amount of money it has
injected into the economy under this programme to 375bn.
Some analysts suggested this total could rise again later this year, as the
economy struggles to exit recession.
"We doubt that the outlook for inflation will dissuade the [Bank] from
announcing more asset purchases later this year," said Samuel Tombs from
Capital Economics.