Inflation falls below 3%
Inflation – as judged by the retail price index – came down slightly in June, from 181.5 to 181.3.
That represents a drop of 0.1% for the year to June, down from 3% in the previous month.
The RPIX – the Government’s target rate, which excludes mortgage repayments – also fell, to 2.8% from 2.9%.
That news should come as something of a relief to the Bank of England which is charged with keeping inflation down to the Chancellor’s long-term target, currently set at 2.5%.
The Office for National Statistics has claimed that downward influences came from the leisure sector, and from the travel industry in particular.
There was also a large downward effect from owner-occupiers’ housing costs, which rose by less than last year, while the reduction in the cost of making off-peak calls also had an impact.
Motoring costs and seasonal foods failing to come down were the significant upward pressures.
However, despite the positive news regarding inflation, the Conservatives pointed out that the gap between the domestic measures and the one used by the EU had stayed at a 14-year high.
According to the harmonised index of consumer prices (HICP), UK inflation in the year to June was down to just 1.1%. Although the figure is good in the sense that is shows Britain has among the lowest inflation in the EU, the Tories insist on the possible problems that the HICP could have in the event of UK entry to the euro-zone.
Shadow Chief Secretary to the Treasury Howard Flight said: “For the Government to continue to suggest there is little practical difference between the two measures of inflation is wrong and misleading. For example the ONS highlights the effect of owner-occupiers’ housing costs on the RPIX index. Yet such costs are not included in HICP.”
“The Chancellor appears to have made little or no assessment of the implication of such a shift for the economy. “
He added: “Gordon Brown’s policy on the inflation index is not based on economics but on the need to satisfy the various euro factions in the Cabinet.”
