Price inflation in the UK has eased again, with the official figures for the year to July 2010 showing the Consumer Prices Index (CPI) measure falling from 3.2% to 3.1%.
This remains above the Government target of 2% for CPI, but is heading in the right direction towards this target level.
These latest figures will prompt another letter from the governor of the Bank of England to the chancellor of the exchequer, explaining why inflation remains more than 1% above the target level.
The Retail Prices Index (RPI) measure of price inflation is now 4.8% for the year to July, falling from 5% in the previous month. RPI is a measure of inflation including mortgage and associated housing costs.
Inflation faced downward pressure for the year to July due to a number of factors. These included the falling price of second-hand cars, lower petrol prices and falling clothing prices.
Economists remain mixed in their views on where inflation will head next in the UK. The VAT increase, from 17.5% to 20% in January, is likely to cause a short-term spike in price inflation early next year, but other factors suggest that inflation will continue to fall.
Inflation in the UK remains above the average level of price inflation in Europe. CPI is used as an international measure of inflation, with the EU as a whole at 1.9% compared to the UK at 3.2%, both for the year to June.
We have to now wait until 14th September to learn if price inflation in the UK will continue to fall.