UK Inflation Falls to 2.7 Percent in August

UK inflation measured by the consumer prices index (CPI) fell to 2.7% in the year to August, from 2.8% in July.

It means prices are still rising faster than wages, which rose by 1.0% on average over the same period.

The Office for National Statistics said the drop was due to air fares, petrol and diesel, and clothing prices rising more slowly than in August 2012.

Inflation as measured by the retail prices index (RPI) rose to 3.3% in August from 3.1% in July.

CPI is important because it is the measure targeted by the Bank of England’s interest rate-setters, while the RPI is used for annual adjustments in some benefits and rail fares.

The Bank targets CPI inflation of 2%, but is currently holding off raising interest rates to control inflation because the unemployment rate is too high.

via BBC

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