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.