The Office of National Statistics has released July's inflation rate figures which show a further drop in UK inflation.With only a 0.1 per cent fall however, inflation is still markedly high.
Edging to 3.1 per cent from 3.2 per cent in June, high inflation rate figures have "surprised" Bank of England Governor Mervyn King. The Retail Prices Index (RPI) slowed to 4.8% from 5% in June, a sign of some positive movement in the UK economy.
In a letter to the Chancellor George Osborne, King explained that the reasons behind lofty inflation rates were "temporary" or short term, including the return of VAT to 17.5 per cent in January following the drop to 15 per cent in response to the recession, past rises in oil prices and higher import prices as a result of the depreciation in the pound since mid-2007. High food prices especially have been earmarked as a factor for the current inflation.
The Consumer Prices Index (CPI) is still well above the Bank of England's 2 per cent target rate, however King stated that he expects the inflation rate to fall below this target in 2012.