The annual rate of UK inflation dropped more than expected in July, thanks to fall in clothing and footwear prices.
The Consumer Price Index (CPI) fell to 1.6% in July from 1.9% in June, according to Office for National Statistics. Economists had forecasted CPI inflation to fall to 1.8% in July.
The Retail Price Index, which includes housing costs, fell to 2.5% from 2.6% in July.
July was the seventh consecutive month that inflation was below the Bank of England’s 2% target. This means that there is a lesser likelihood for a rise in interest rates.
Clothing and footwear prices fell by 5.7% between June and July, compared to a 3.2% fall during the same period last year.
Alcohol prices, the cost of financial services including bank overdraft charges, and food prices also eased, contributing to a fall in annual rate of UK inflation.
A Treasury spokesman said: “The government’s long-term economic plan is working, with today marking the seventh consecutive month that inflation has been below the Bank of England’s 2% target.
“But the effects of the great recession are still being felt and so we have taken continued action to help with the cost of living, including cutting income tax, freezing fuel duty and reducing the costs of childcare. The job is not yet done so the government will go on making the realistic assessment of what needs to be done to deliver a brighter economic future.”
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