GEORGE Osborne has welcomed a bigger than expected fall in inflation to 1.6 per cent, saying it was "welcome news" for Britain's family budgets but it could also produce a political advantage by putting back any rise in interest rates until 2015, possibly even after the General Election.
Fashion sales and fierce competition among supermarkets helped keep the lid on food prices for the longest stretch in a decade.
The drop in the Consumer Price Index(CPI) measure from 1.9 per cent in June caused the pound to fall by a cent against both the dollar and the euro.
The latest numbers mean inflation has been below the Bank of England's 2 per cent target for seven months in a row; the first time this has happened since 2005.
Prime Minister David Cameron said: "Good news inflation is down to 1.6 per cent. We have to stick to our long-term economic plan to ensure financial security for families," while the Chancellor tweeted: "Welcome news for family budgets that inflation has fallen to just 1.6 per cent." But Cathy Jamieson, the Shadow Treasury Minister, said: "While this fall in the rate of inflation is welcome, the squeeze on working people continues." Wages are still struggling with latest figures showing a 0.2 per cent fall. The Bank of England recently halved its forecast for 2014 pay growth from 2.5 per cent to 1.25.
The largest contribution to the fall in CPI came from clothing and footwear, where prices fell 5.7 per cent month-on-month or 0.2 per cent year-on-year. Food and non-alcoholic beverages fell 0.4 per cent year-on-year after no change in June and a 0.6 per cent drop in May. May's decline was the first since March 2006.
Last week the Bank pushed back City forecasts for the timing of an interest rate rise.
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