UK CPI Decreases For Second Month

The UK rate of inflation has recorded a further fall over the course of August, down to just 1.8% as an indicator that increased interest rates have finally had an impact on dampening inflation.

In official figures released today the UK rate of inflation was shown to have fallen further within the government’s safety zone of 2% after successive interest rate rises over the first half of the year, fuelling expectations that there will be no more interest rates through 2007.

The influential Consumer Price Index slipped backed to 1.8% over August after recording a 1.9% fall over the course of July, adding to speculation that UK interest rates may now have peaked at the 5.75% mark now that inflation is under control.

Analysts had previously suggested that rates would rise once more over the course of the year to a round 6.00% to reflect the threat of inflationary pressures within the economy, with the inevitable side effect of hampering consumer spending and business expansion.

However after the responsiveness to change reflected in the CPI figures over the last few months, it is now looking unlikely that the Bank of England will raise rates any further, potential risking economic growth and business development.

Current market volatility had postponed any previous thoughts of an interest rate rise, which could have actually allowed the economy time to respond to the effects of the five rate rises seen over the course of this year.

The Bank of England is expected now to turn more towards bringing some form of stability back to financial markets after Northern Rock became the first major UK casualty of the sub-prime fallout.

With interest rates at a stable 5.75%, the Bank may turn to cutting this down in order to alleviate pressures on financial markets and boost economic growth nationwide.

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