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Inflation falls below government target |
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Tuesday, 14 August 2007 |
The government’s preferred measure of inflation, the Consumer Price Index (CPI), dropped to below the government’s target of 2 per cent for the first time since March last year.
The CPI inflation measure is 1.9 per cent for June, a fall from 2.4 per cent a month previously. This has raised hopes that a further rise in interest rates will not be needed by the Bank of England, following the increase in rates to 5.75 per cent in July and the decision to hold rates at that level this month.
The Retail Price Index, an inflation measure often used in wage bargaining, fell to 3.8 per cent in July from 4.4 per cent the previous month.
Commenting on the figures, Liz Cameron, the executive director of Scottish Chambers of Commerce, said: “This is encouraging news for the Scottish economy. Although the scale of this fall in inflation at this time may come as a surprise to some, it reinforces the case we have been making for some time that previous interest rate rises implemented by the Bank of England needed time to be allowed to take effect.
“With inflation now back within the Government’s target of 2 per cent, it is more important than ever that the Bank refrains from future interest rate rises which could have a damaging effect on the competitiveness of Scottish businesses.
“Scottish Chambers of Commerce have consistently called for restraint from the Bank of England in its interest rate policy and these inflation figures seem to support this case.
“Whilst we cannot read too much into one month’s inflation figures, the downward trend in CPI inflation over the past three months must surely lift the threat of a further interest rate rise for at least the remainder of this year.”
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