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Inflation slows but still remains above target rate

 

Inflation slowed in July but still remains above the Government's 2% target.

 

The Consumer Prices Index (CPI) edged down from 3.2% to 3.1% over the month. Falling petrol costs and second-hand car prices over the month helped ease CPI overall, but pressure from rising food costs has kept the CPI above 3% throughout 2010. Food prices jumped 0.7% between June and July, the biggest monthly rise for two years.

 

The Governor of the Bank of England has to pen an open letter to the Chancellor when CPI has been more than one percentage point above or below 2% for three months in a row.

 

In his letter this month, Mervyn King said rate-setters had been "surprised" at the recent strength of inflation, and warned: "How fast and how far inflation will fall are both difficult to judge, with substantial risks in both directions.”

 

The headline rate of Retail Prices Index inflation also fell to 4.8% in July from 5% in June, the Office for National Statistics (ONS) said.