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SURPRISE DIP IN INFLATION IN JUNE

Fuel prices fall for the fourth month in a row

SURPRISE DIP IN INFLATION IN JUNE

The latest figures from the ONS revealed a surprise dip in inflation in June, with the Consumer Price Index (CPI) dropping to 2.6% from the previous month’s figure of 2.9%.

The CPI figure has risen since last June’s referendum, partly as a result of the fall in the sterling exchange rate and the implied increase in imported goods and material costs, the fall came as a surprise to many economists, some of whom believe this month’s figures may be a blip rather than a trend. Many economists are keeping their powder dry on the future trend of inflation as they believe that the country has not yet reached the peak of inflationary pressure.

However, such a fall in inflation will be likely to temper the Bank of England’s (BoE) Monetary Policy Committee’s thinking on any possible increases in interest rates.

The largest factor of the fall in prices came from the cost of motor fuels, both petrol and diesel, as a result in the continuing decline in the price of crude oil. The ONS report that fuel prices fell for the fourth month in a row in June.

Other factors included a reduction in cultural and recreational goods prices, such as theatre tickets, computer games and sporting events. The wider Retail Prices Index (RPI) which, whilst not an official statistic, is still used to calculate various rates, such as the interest rates on student loans, also fell from the previous month’s figure of 3.7% to 3.5% in June.