Britain's CPI index drops to five-year low in September
- Source: Xinhua
- [08:34 October 14 2009]
- Comments
Britain's Consumer Prices Index (CPI) fell to an annual rate of 1.1 percent in September, the lowest in the past five years, according to figures released Tuesday by the Office for National Statistics (ONS).
Economists had predicted an annual rate of 1.3 percent. The CPI index remained unchanged between August and September this year.
The ONS said that electricity, gas and other fuel bills paid by households fell by 7.3 percent in September compared with the same period of last year, which was the main reason behind the decline of the CPI annual rate.
In addition, food inflation dropped by 0.3 percent, which was also an important factor for the CPI decline.
In recent months, the CPI in Britain declined continuously and now it has fallen to below the 2-percent mark as set by the Bank of England, the country's central bank.
Meanwhile, annual inflation of the retail prices index (RPI), including mortgage interest payments, dropped by 1.4 percent from a year ago. This is mainly because that the Bank of England cut interest rates constantly to a record low of 0.5 percent.
As a result, the British pound fell to a five-month low against the US dollar of 1.5722 and it also fell to a six-month low against euro of 1.0628.
However, with value-added tax set to rise from current 15 percent to 17.5 percent, the CPI inflation would likely move back above 2 percent at the beginning of next year, said Jonathan Loynes, chief European economist from Capital Economics.
"We do not expect the pick-up to prompt any withdrawal of the monetary stimulus currently in place, " he said.
The British Chambers of Commerce said Tuesday that though business confidence was improving, the British economy still remained "frail."
The economy would not grow in the third quarter of this year and it would shrink by 4.3 percent in the whole year, according to the National Institute of Economic and Social Research.
