British inflation eases to 3.1 percent

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The prices of goods in Britain rose at a slightly slower pace in July compared with June on an annual basis, largely thanks to falling transport costs, official data showed on Tuesday,

Consumer Price Index (CPI) 12-month inflation, the government's target measure, fell to 3.1 percent last month from 3.2 percent in June, the Office for National Statistics (ONS) said in a statement.

However, the level remained far above the Bank of England's 2.0-percent target rate owing to higher food costs.

"Transport costs produced the largest downward pressure to the change in CPI inflation between June and July," the ONS said.

"This was mainly due to the price of second-hand cars falling between June and July this year but rising over the same period a year ago; the price increase of 3.0 percent last year was a record for a June to July period."

Other downward pressures came from lower fuel and clothing costs, it added.

On a monthly basis, July CPI inflation fell by a larger-than-expected 0.2 percent from June. Market expectations had been for a drop of 0.1 percent after a slight rise in June, the ONS added.

"July's UK consumer prices figures should provide some reassurance that underlying price pressures in the UK economy are starting to ease," said Capital Economics analyst Jonathan Loynes.

The Bank of England last week forecast that annual inflation would hold above 2.0 percent until the end of 2011 owing to a looming increase in sales tax, before falling under the target level in early 2012.

© 2010 AFP

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