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Food prices lead to worse than expected inflation figures

Only last week it appeared the UK inflation rate was set to fall from 3.1% in July to 3.0% in August, which makes today's announcement from the authorities even more disappointing. The consumer prices index remained at 3.1% in August despite analyst's expectations of a slight easing and a "move in the right direction". So what went wrong?

There is no doubt that food inflation is behind the underlying strength of the consumer prices index and many experts believe food prices will push higher in the short to medium term. Unless there are significant price reductions in other areas of the consumer prices index it seems likely that we will see higher inflation rates in the short to medium term. However, one bit of good news was the reduction in the value of the retail prices index which fell from 4.8% in July to 4 .7% in August although this was still slightly higher than analyst's expectations of 4.6%.

Only a few days ago there seemed to be hope that UK inflation was moving downwards but today's unexpected news that the rate remained constant between July and August has unsettled some investors. Just when we thought the UK economy was beginning to come out of the woods!

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