A 0.3% fall in the Consumer Prices Index to 1.6% in July will likely take the pressure off Bank of England governor Mark Carney (pictured) to up interest rates.
CPI fell to 1.6% over the year to July, falling month-on-month after a near brush with the 2% threshold in June.
The 0.3% fall was down to a fall in clothing prices, while a 0.4% fall in the prices of food and non-alcoholic beverages on the year had a downward pull on inflation rate, the Office for National Statistics said. This provided the largest downward contribution of any product group for the 12-month rate for July. Housing, water, electricity, gas and other fuels accounted for around a quarter of inflation.
Meanwhile, the 12-month rate for RPIJ, a variant of the Retail Prices Index (RPI) that meets international standards, stood at 1.8%, down from 2% in June. The RPI 12-month rate for July came in at 2.5%, meaning that it was 0.7 percentage points higher than it would have been had it used formulae that meets international standards.
Laith Khalaf, senior analyst at Hargreaves Lansdown, responded to the figures by commenting: 'Consumer prices inflation continues to look contained, and at current levels is unlikely to put pressure on Mark Carney to become a 'reliable boyfriend' when it comes to interest rate policy.
'As long as inflation remains benign, the central bank will also have leeway to raise interest rates slowly and gradually, when they decide the time has come to do so.
'This month's RPI figure is particularly significant for rail passengers as it determines next year's ticket price rises. Train operators can increase regulated fares by RPI + 1% on average, and have the ability to raise some fares by a further 2%. With wages barely growing, this is likely to fuel further claims of a cost of living crisis.'