skip to main content

British inflation takes unexpected fall

British inflation unexpectedly fell below target to its lowest in more than a year in August.

The British Office for National Statistics said consumer prices rose 1.8% on the year last month. Analysts had expected inflation to hold steady at 1.9%.

The data gives the Bank of England room to cut interest rates if the credit crisis deepens.

The BoE is unlikely to be surprised by the fall, as it said earlier this month that inflation was likely to remain below or around the 2% target for the next few months.

The downward effect on consumer price inflation was helped by some mortgage lenders cutting their exit administration fees. Those cuts took 0.05% off the annual rate.

There was also a large downward effect from utility bills as major service providers phased in advertised tariff reductions.

Housing, water, electricity, gas and other fuels inflation slipped to 2.8% from 3.5% in July, the lowest rate since March 2004.

Clothing and footwear also exerted a downward influence as women's clothes prices rose less than a year ago.