Modest fall in inflation is good news, but MPC must remain cautious

13th August 2013

·         Annual CPI inflation was 2.

8% in July 2013, down from 2.9% in June ·         Annual RPI inflation was 3.1% in July 2013, down from 3.3% in June ·         The largest contribution to the fall in inflation came from air fares, recreation and culture, clothing, and footwear. This was partly offset by a rise in petrol and diesel prices   Commenting on the inflation figures for July 2013, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:   -At a time when earnings growth is weak and the government is pressing ahead with its austerity measures, any fall in inflation eases the pressure on businesses and consumers. There is now greater hope that increases in inflation above the 3% mark will be avoided, but the situation remains uncertain and renewed surges in energy prices could push inflation up again.   -Businesses need long-term reassurance when making decisions that affect their company. With this in mind, we hope that the MPC rejects initiatives such as adding to QE that could add to inflationary pressures. The UK economy is now recovering at a moderate pace, and we would urge the government and MPC to do everything possible to sustain recent positive trends.

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