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Provisional indications show drop in UK inflation

An unofficial survey of 30 economists has led to hopes that the UK rate of inflation fell towards 3% in August against 3.1% in July. While this data has yet to be confirmed by the Office for National Statistics, which will release the official information on 14 September, provisional economist calculations appear to show that prices fell during the month of August. So what does this mean for the UK economy?

Any reduction in UK inflation will be well received by consumers, businesses and investors and potentially leave the MPC to concentrate upon increasing liquidity in the UK business arena. The issue on inflation has been behind the scenes for some time and in the back of the minds of many MPC members who have expressed their concern in the short-term. It will be interesting to see, assuming this information is correct, how the Bank of England reacts to this reduction and indeed whether it will bring forth any liquidity support programs.

A reduction in inflation will also take some pressure off UK households who are actually struggling to make ends meet in one of the most difficult and challenging economic environments for many years. Price inflation has been far outstripping wage inflation for some time now which effectively means that the pound in your pocket is reducing in spending power on an ongoing basis.

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