The consumer prices index (CPI) rate of inflation fell to 1.6% in July 2014, down from 1.9% in June 2014, according to official figures.
The Office for National Statistics (ONS) said falling clothing prices had made the biggest contribution to the drop, while alcohol, financial services and food products had also experienced declining prices.
This is the seventh consecutive month that the CPI has been under the Bank of England’s 2% target rate.
Official figures show between June and July 2014:
- clothing and footwear prices fell 5.7%
- alcohol and tobacco and food also fell slightly
- transport was the biggest upward contributor, with prices rising an average 1.3%.
David Kern, chief economist at the British Chambers of Commerce, cautioned against a “premature” rise of interest rates:
“We must nurture the business confidence we are seeing at present by giving businesses the security of working in a low interest rate environment. The government should reinforce this stable backdrop by introducing measures to help firms access the finance they need to grow, and by enhancing support for our exporters.”