Inflation rate falls to 1.5%
16/09/2014
The annual inflation rate fell to just 1.5% in August, according to the Office for National Statistics (ONS).
Some of the major factors which have resulted in the falling rate of inflation are the costs of amenities such as food and petrol, which have decreased in recent months due to a supermarket price war.
The ONS, who publish the official inflation data said: “Falls in the prices of motor fuels and food and non-alcoholic drinks provided the largest downward contributions to the change in the rate".
Inflation was measured at 1.6% a month earlier in July, which is already below the Bank of England target inflation rate of 2%.
Samuel Tombs, a senior UK economist at Capital Economics claimed that factors such as stable energy bills, lower import prices and low wage growth meant that inflation could “fall to as low as 1% by the end of this year”.
Interest rates could increase
As price growth has continued to fall in recent months, the Bank of England has remained hesitant to increase interest rates. However, the Monetary Policy Committee (MPC), who are in charge of setting interest rates were split for the first time in over three years.
The MPC consists of nine members, two of which voted to increase interest rates this month and seven who voted to keep them the same. The reason these two members gave for voting to increase interest rates was that they “noted that the continuing rapid fall in unemployment alongside survey evidence of tightening in the labour market created a prospect that wage growth would pick up".
However, despite the prospect of interest rates being increased, Chris Williamson, chief economist at Markit claimed that rates are likely to remain low for the foreseeable future.
He said: "The downturn in inflation provides policymakers with greater leeway to keep interest rates on hold for longer while the economy continues to recover."
Need financial advice?
If you have any personal finance questions related to this news article, then please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.
Share this..
Related stories
Lookers issue downbeat statement on the UK car industry
Despite yesterday's announcement from Pendragon that the company believes the mountain of unsold cars in the UK is nearly clear, fellow car dealership Lookers has today issued a statement which is a little more conservative to say the least.
While the company recognises that the UK government's £300 million car scrappage scheme has gone a long way to injecting interest into the sec...
Deflationary pressure hits the Eurozone
As deflation hits the Eurozone for the first time since its introduction in 2009 there are fears for the short to medium term. The inflation figure for May came in at 0% but the figure for June has come in at -0.1% which has started alarm bells ringing within the EU. A mixture of lower energy costs, lower food prices and lower demand in general has introduced a significant about of competition int...
Read MoreIs the UK recession nearing an end?
The last few days has seen the release of significant data and significant reports which appear to show a growing confidence in the UK economy. While it would be wrong to suggest that the UK economy will bounce significantly in the short term there are signs that confidence is starting to seep back into the market place. Are we really at a turning point in the recession or is this just another fal...
Read MoreCurrency counterfeiting on the increase
As we have pointed out on a number of occasions, the ongoing recession in the UK has attracted a significant increase in criminal activity with currency counterfeiting one of the leading "benefactors". It is estimated that one in 20 one pound coins in the UK are counterfeit which equates to a staggering 73 million fake coins in circulation. When you consider that a fake one pound coin can cost bet...
Read MoreHas Gordon Brown done enough to save his skin?
Today's Queen's speech was the shortest in living memory lasting only seven minutes but one which introduced a number of potentially legally binding guarantees with regards to UK public services. There were also a number of resolutions to control the power of the banking sector and the bonuses paid to those at the top, in what many people believed was a dumbing down to the UK electorate. So has Go...
Read More