Inflation: Rate of inflation falls slightly


Inflation AugustNew figures have shown the rate of inflation in the UK fell slightly last month.

Data released today, by the Office for National Statistics (ONS), shows the Consumer Prices Index (CPI) fell from 2.9% in June to 2.8% in July, as the cost of air fares, clothing and leisure goods fell.

The Retail Prices Index (RPI), which is used to calculate rises in rail fairs, state benefits, National Savings & Investments Index Linked bonds as well as many pensions, also fell, from 3.3% in June to 3.1% in July.

Bank of England inflation target

The Bank of England has a target of keeping inflation at 2%, although in his first major speech as new Governor, Mark Carney said that interest rates, the main lever used to control inflation, would not be reduced until unemployment hit 7%. Most experts believe this will take around three years.

The small cuts in the rate of inflation were broadly in line with market expectations, although will do little to help savers struggling to find a real return on their savings accounts.

There are currently no savings accounts which pay a high enough rate of interest to allow taxpayers to receive a real return.