A supermarket price war helped the UK’s rate of inflation to fall to 1.9% in July, far below analysts’ forecasts.<\/p>\n
The CPI (Consumer Price Index) dropped from June’s level of 2.4%, raising hopes that further rises in interest rates will not be necessary.<\/p>\n
It is the first time UK inflation has fallen below the government’s target of 2% since March 2006.<\/p>\n
The Retail Price Index, a measure often used in wage bargaining, fell to 3.8% in July from 4.4% the previous month.<\/p>\n
“This is a massive surprise,” said Howard Archer, chief UK and European economist at Global Insight.<\/p>\n
“Consumer price inflation fell back far more than anyone was expecting in July, including, we strongly suspect, the Bank of England.<\/p>\n
“This will boost expectations that interest rates have peaked at 5.75%, especially as the current turmoil in global credit and financial markets further dilutes the case for higher interest rates, for now at least.”<\/p>\n
The news caused the pound to fall below the $2 level for the first time for some time.<\/p>\n
Speculators considered the possibility that the Bank of England would reconsider raising interest rates one more time to rein in inflation, as it had previously suggested it might.<\/p>\n
Higher interest rates give currency investors better income and vice versa. At 0840 GMT, one pound traded at $1.999, down from $2.008 before the data was released.<\/p>\n","protected":false},"excerpt":{"rendered":"
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