Consumer Price Index inflation, the target measure used by the government, fell to 3.1% in July, down from 3.2% in June, according to a statement from the Office for National Statistics.
The slight improvement has been largely put down to falling transport costs, but the figure is still 1.1% higher than the Bank of England’s 2% target. This is the eighth consecutive month that the Bank has missed its target.
This prompted a third letter from Mervyn King, governor of the Bank of England, to the chancellor George Osborne, to explain why the inflation target has been missed.
In his letter to Mr Osborne, Mr King said: “There remains a significant probability that I will need to write further open letters to you in the coming months. How fast and how far inflation will fall are both difficult to judge, with substantial risks in both directions relative to the Monetary Policy Committee’s central view.”
The Bank of England has predicted that annual inflation would be above 2% until the end of 2011, because of an increase in sales tax, before it comes under the target level in early 2012.
