17.09.201404:21:58UTC+00UK inflation falls below target at 1.5%

Inflation for the UK continued to linger below the Bank of England’s (BoE) target level after falling last month behind cheaper food and oil.

Official figures from the Office of National Statistics’ (ONS) consumer price index (CPI) showed that the falling cost of food and petrol contributed greatly to inflation declining to 1.5% during the month of August from the 1.6% of July. The drop in prices is expected to bring only limited relief to households, however, as separate data from the labor market showed that average earnings increased by only 0.5% during the period of May to July compared to the previous year, far behind the rate of inflation.

Minister Catherine McKinnell of the shadow Treasury described the situation by saying that, "While this fall in the rate of inflation is welcome, the squeeze on working people continues.”

Economists say that the report indicates benign price pressures in the UK economy which would put policy makers from the BoE under no hurry to hike up interest rates. The central bank’s monetary policy committee has maintained its benchmark borrowing costs at a record 0.5% for the last five years. Speculation is high over the looming increase amidst the uncertainty brought by a combination of a strong economic recovery, declining inflation, and the eventual outcome of Scotland’s vote for independence later on this week.

According to the ONS, much of the drop in the CPI could be attributed to cheaper prices for food and non-alcoholic drinks brought about by supermarkets offering discounts to lure back customers. Oil also played a role with global prices at the lowest in two years. Price increases in clothing, alcohol, and transportation offset some of the downward pressure.