UK inflation falls below 2%

Consumer Prices Index (CPI) annual inflation fell to 1.8 per cent in June, down from 2.2 per cent in May and the first time it has fallen below the Government's 2 per cent target since September 2007.

Figures published by the Office for National Statistics also reveal that annual inflation measured by the Retail Prices Index (RPI) - which includes housing costs such as mortgage interest payments and council tax - was -1.6 per cent, compared with -1.1 per cent in May. This is the lowest RPI figure since records began in 1948.

The largest downward pressure on the CPI came from food and non-alcoholic drink prices, which fell between May and June this year but increased over the same period last year.

Within the category, the downward pressure came from meat, bread and cereals, fruit, vegetables and milk, and cheese and eggs. There was also a smaller downward effect from sugar, jam and confectionery.

A significant downward effect also came from furniture prices, which rose by less than last year.

There was one large upward pressure on the CPI annual rate which came from the recreation and culture category, where the price of computer games rose by more than a year ago.

The main factors affecting the CPI also affected the RPI. RPIX inflation - the all-items RPI excluding mortgage interest payments - was 1.0 per cent in June, down from 1.6 per cent in May.

As an internationally-comparable measure of inflation, the CPI shows that UK inflation in May, at 2.2 per cent, was above the provisional figure for the European Union as a whole of 0.7 per cent.