July’s consumer prices figures showed that, while CPI inflation remains below its 2% target, it is still being rather slower to fall than in other countries. Nonetheless, inflation is still likely to fall to very low levels eventually.

Economists had expected the Consumer Prices Index (CPI) to decline to 1.5% in July. The Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments, also unexpectedly rose to -1.4%, from -1.6%.

The drop to 1.8% in June was the first time in two years that CPI rate, the government’s preferred measure of inflation fell below the Bank of England’s 2% target rate.

Earlier this month, the Bank said it was “more likely than not” that the annual rate of growth in consumer prices would temporarily fall below 1% in the autumn and stay low until the end of its two-year forecast period.

UK and European markets have opened down around 1% this morning and U.S futures are currently pointing to a negative start when their markets open up this afternoon.

Sources: Reuters: BBC: Bloomberg: Lawshare: Deutsche Bank (db): Proquote: Financial Times: Wall Street Journal: CLSA: Sharescope: Market News. Capital Economics: CNBC: Wikipedia: GaveKal:

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