UK Inflation Falls Beyond Expectation

By Stewart Douglas

The United Kingdom’s rate of inflation has fallen below analyst expectations to just 1.9% through July.

The figures released today show a drop in inflation greater than many had previously expected, taking it below government targets for the first time in over a year.

The Consumer Price Index reflected a significant downturn in price inflation from 2.4% last month to just 1.9%, within the government’s 2% target margin.

The Bank of England has raised interest rates five times since the beginning of this year, and analysts had predicted further rises could be on the cards to tame inflation.

However, with the figure now resting comfortably within the government’s inflation targets, it is possible that interest rates could remain stable over the coming months. 

The news has been well received by homeowners paying a variable mortgage, which tracks the Bank of England base rate to calculate interest repayments. 

After five repayment rises this year alone, many homeowners had felt the purse strings tighten with further rises apparently imminent.

Particularly with the statement that ‘one more rise would be necessary’ in the Quarterly Inflation Report last week, homeowners nationwide had been preparing for a further increase in the cost of borrowing.

The news has underlined suggestions that interest rates may have peaked at 5.75%, with the number of home buyers dramatically decreasing over the same period.

With inflation now within acceptable boundaries, much to the surprise of analysts and the Bank of England, it looks as though interest rates may be maintained at current levels, contrary to the central bank’s intimation in last week’s Quarterly Inflation Report.

The announcement slightly weakened the value of the pound against the dollar, bringing it below the $2 mark to $1.999 early this morning, news which has been celebrated by UK exporters.