Fall in inflation strengthens case for low interest rates

19th August 2014

Annual CPI inflation in July 2014 was 1.

6%, down from 1.9% in June The largest contribution to the fall in inflation was clothing prices The largest offsetting factor came from transport Goods price inflation in July 2014 was 0.8%, while services inflation was 2.5% Commenting on the CPI inflation figures for July 2014, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said: -The welcome fall in inflation confirms that the increase in June was temporary and doesn't signal a new upward trend. While wage increases remain very low and the pound is still relatively strong, we expect inflation to remain below the 2% target for the foreseeable future. -Although the recovery remains on track, it is still fragile and now is not the time to put it at risk with premature interest rate rises. We must nurture the business confidence we are seeing at present by giving businesses the security of working in a low interest rate environment. The government should reinforce this stable backdrop by introducing measures to help firms access the finance they need to grow, and by enhancing support for our exporters.

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