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Prices decline in June

Rate rise pressure eases as inflation in surprise fall

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Inflation still ahead of wage growth

A rise in interest rates looked less likely after inflation fell unexpectedly to 2.6% in June from 2.9% in May. It was the first fall since last October.

The easing of the inflation rate was put down to a fourth consecutive fall in petrol and diesel prices.

Despite the lower level of inflation, it is is still ahead of average wage inflation of 2%, excluding bonuses.

Inflation has risen largely because of an increase in the cost of imported goods following the fall in the value of the pound.

The latest data from the Office for National Statistics will likely see pressure easing on the Bank of England to raise interest rates.

Lucy O’Carroll, chief economist at Aberdeen Asset Management, said: “These numbers are a real surprise.”

Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said: “June’s fall in inflation is significant, although much of the downward pressure came from a fall in fuel prices this year compared to an increase at the same time last year.  Staples such as food and household goods continue to increase and expectation remain that inflation will continue to rise above the target rate of 2% for some time to come.

“Nonetheless, it should ease some of the growing pressure from the Bank of England’s Monetary Policy Committee for an early rise in interest rates.”

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