UK inflation, as representing by the consumer prices index (CPI), posted an annual decline of 0.1% in the 12 months to the end of August, as reported by the Office for National Statistics. A poll of economists conducted by Bloomberg had suggested a rate of 0% would be seen. The downward pressure on inflation came from a fall in prices of clothing, footwear and petrol prices.

Core inflation, which excludes the more volatile prices of food and energy, remained at 1%. The Bank of England takes notice of this figure as it provides an indication of inflationary pressures excluding what has happened with the oil price over the last 12 months. The retail price index (RPI) posted a rise of only 0.8% for the 12 months to August, compared to an increase of 1.1% the previous month.

Whilst wage inflation is positive over the last 12 months this appears to be having little impact on consumer prices at the aggregate level. The Bank of England will be keen to monitor developments however as the fall in the oil price from over $80 per barrel starts to fall out of the CPI calculation, assuming further falls from the current level are not seen.