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UK CPI falls to 2.8%
by David Campbell on Aug 13, 2013 at 09:42
UK consumer price inflation fell to 2.8% in July, down on the previous month’s 2.9% but still well ahead of the Bank of England target of around 2%.
Some of the previous increase in the annual rate was due to a rebasing effect after retailers began their 2012 summer sales in June, earlier than usual.
Air fares, clothing and recreation prices were big contributors to the monthly fall, while energy costs continued to weight to the upside.
Capital Economics said that the wider trajectory of pricing pressures suggested that a spike upward earlier in the year would now begin easing into year-end, however.
ONS statistics on producer prices showed the index falling to 1.10% in the month, well below a Reuters survey of economic expectations at 1.40%.
‘Although there are growing signs of economic recovery, we think the degree of slack in the economy will help push down CPI inflation close to the MPC’s 2% target by the end of the year,’ said Martin Beck, UK economist at Capital Economics.
‘The rationale for the forward guidance announced by the MPC last week just got a bit stronger. ‘
After starting the day lower, the pound rose sharply against the dollar, up 0.03% to $1.54. Against the euro the pound pared earlier losses but remained below its opening at 0.85.
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