Inflation falls back to 2.5 per cent
Published On 13 June 2007
The Bank of England's decision not to increase interest rates in June looks to have been justified as official figures show that inflation continued to fall last month.Data published by the Office for National Statistics (ONS) showed that consumer price index (CPI) inflation fell back to 2.5 per cent in May - compared to 2.8 per cent the month before.
While still above the government target of two per cent, experts will be comforted by the downward pressure on prices as many people expected that interest rates would have to be increased again to bring inflation under control.
The ONS report showed that the strongest downward pressure on prices came from the costs of utilities like gas and electricity which have fallen back in recent months when compared to last year.
The report added: "There was also downward pressure from food and non-alcoholic beverages, mainly due to vegetable prices falling this year, reflecting good supplies following favourable growing conditions and reports of low demand for some produce.
"A further large downward effect came from clothing and footwear, where prices were little changed this year but rose a year ago for outerwear, with the main downward contributions coming from jeans and women's skirts."
Mortgage holders and people with high levels of debt will welcome the inflationary news as it makes it more likely that the Bank will not increase interest rates when they meet in July.
