SCOTTISH Chambers of Commerce has welcomed news of a further fall in UK inflation, believing the latest drop gives the Bank of England further scope to hold off from raising benchmark interest rates for now.
Figures published yesterday by the Office for National Statistics showed that annual UK consumer prices index inflation fell from 1.6 per cent in July to 1.5 per cent last month. This fall took it even further below the target of two per cent set for the Bank of England by the Treasury. Annual CPI inflation has been below two per cent in every month of this year.
Consistently below-target inflation in recent times and continued weakness of wage growth have reduced the chances of the first rise in UK base rates from their record low of 0.5 per cent coming before the end of this year.
However, separate figures published yesterday by the Office for National Statistics showed annual growth in UK house prices accelerated to 11.7 per cent in July. UK house prices are growing at their fastest annual pace in seven years. Annual house price inflation in Scotland in July was 7.6 per cent, the ONS figures showed.
The drop in annual UK CPI inflation between July and August resulted partly from a 0.2 per cent month-on-month fall in prices in the food and non-alcoholic beverages category, which contrasted with a 0.5 per cent rise at the same point last year. The ONS highlighted changes in the prices of cheese and yoghurt. And prices in the furniture, household equipment and maintenance category rose less sharply last month than between July and August 2013.
UK base rates have been at 0.5 per cent since March 2009.
Liz Cameron, chief executive of Scottish Chambers of Commerce, said: "Inflation has been below the Government's target for each and every month of 2014 so far. Broadly speaking, this is good news for our economy since it eases the pressure on the Bank of England to raise interest rates.
"However, despite consistently-low inflation, prices are still rising ahead of wage increases and this limits the extent that consumer demand can contribute to the growth of our economy in the longer term."
She added: "The focus for economic growth must now be on business investment...and increasing productivity, which will be required to deliver a growth in earnings."
Annual inflation of the old all-items retail prices index measure fell from 2.5 per cent in July to 2.4 per cent in August.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article