Inflation falls to lowest level in nearly five years
Inflation falls to lowest level in nearly five years
Tuesday 15th September 2009
Inflation in the UK fell to its lowest level in nearly five years during August, the Office of National Statistics (ONS) has found.The government's target measure, the consumer prices index (CPI) fell from 1.8 per cent to 1.6 per cent, which the ONS said was largely down to falling food prices and household energy bills remaining unchanged.
However, the retail price index (RPI) inflation measure, which includes mortgage payments, rose to minus 1.3 per cent from minus 1.4 per cent.
While food and energy bills also put downward pressure on the RPI, house price rises this year - in contrast to falls in last year's torrid property market - helped to push the measure back towards positive territory during August.
An ONS statement read: "By far the largest upward contribution to the change in the CPI annual rate came from transport.
"The largest effect came from fuels and lubricants where prices rose between July and August this year, but fell a year ago at the fastest ever rate for a July to August period. The average price of petrol rose by 1.1 pence per litre between July and August this year, to stand at 103.8 pence, compared with a fall of 5.5 pence last year.
"Within transport, there was also a large upward contribution from the purchase of second hand cars, where prices rose this year at their fastest ever rate for a July to August period but fell a year ago. Partially offsetting these upward effects was a large downward contribution from air transport, where fares on European routes rose this year but by less than a year ago."
Mervyn King, the Bank of England's governor, told the Treasury select committee inflation was "likely to be volatile" over the next six months. The Bank of England aims to maintain inflation at two per cent.
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