U.K. Inflation Slows Below 2%


The U.K. inflation rate dropped in June below the Bank of England's 2 percent target for the first time since September 2007 as the recession sapped price pressures in the economy.

Consumer prices rose 1.8 percent from a year earlier, compared with 2.2 percent in May, the Office for National Statistics said today in London. The retail price index measure of inflation fell 1.6 percent, the most since records began in 1948.

On the month, consumer prices rose 0.3 percent. The annual inflation rate dropped as the cost of food and non-alcoholic drinks fell, the statistics office said. The Bank of England currently predicts it may not return to the target by 2011.

Inflation has slowed after the economy slumped into recession. Gross domestic product fell 2.4 percent in the first quarter, the most in five decades.

The retail price index, a measure of the cost of living used in pay bargaining, dropped because of the same factors affecting the consumer price index, the statistics office said. Excluding mortgage interest payments, it slowed to 1 percent, the least since records began in 1976.


TradingEconomics.com, Bloomberg
7/14/2009 10:24:18 AM