Inflation falls to 1.8 per cent

Tuesday 14th July 2009

Inflation fell to 1.8 per cent in June, the lowest level in almost two years.

The figure is now below the government's two per cent target for the first time since September 2007.

Figures released show the consumer price inflation (CPI) has fallen steadily from its peak at 5.2 per cent in September 2007.

In response the Bank of England has reacted by slashing interest rates to record lows of 0.5 per cent.

The retail price index (RPI), also released on Tuesday by the Office of National Statistics (ONS), fell from -1.1 to -1.6, the lowest level since records began in 1948.

Falling food prices in June drove the fall in CPI, compared with last year when food costs were rising sharply.

Analysts are predicting deflation on the CPI index as the recession keeps prices low and consumers cut back on spending. ADNFCR-1783-ID-19263698-ADNFCR

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