Inflation eases closer to the 2pc target

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INFLATION ticked down in August despite a rise in oil and fuel costs, providing the Bank of England with more leeway to inject additional cash into the fragile economy.

The Office for National Statistics said this week that consumer price inflation slowed to 2.5 per cent last month from 2.6 per cent in July, in line with economists’ forecasts. Government bond prices ticked up after the release. The central bank has been hoping that inflation will ease back towards its 2 per cent target over the next few months, helping cash-strapped Britons and supporting consumption.

“There is a little bit of relief for me around these numbers,” said RBS economist Ross Walker, adding that he had expected greater upward price effects on recreational goods and hotels and restaurants from the London Olympics.

“These numbers don’t present any immediate hurdle in terms of further (monetary) loosening.”

Easing price pressures for furniture, health, household services and clothing helped bring the annual inflation rate down, the ONS said.