The consumer prices index fell to 1.6% from 1.9% in June, marking the seventh month in a row that annual inflation has registered below the Bank of
Economists had expected a smaller fall to 1.8%.
The larger-than-expected drop was driven mainly by greater summer price discounting among clothing retailers than is usual at this time of year. Clothing and footwear prices fell by 5.7% between June and July, compared with a smaller fall of 3.2% during the same period last year. Prices were slashed on a wide range of items, including trousers, coats and jumpers.
Alcohol prices, the cost of some financial services including bank overdraft charges, and food also contributed to the fall.
The news was not all good for consumers, who could face rail fare rises of up to 5.5% in 2015. The July inflation rate on the retail prices index (RPI) measure is used to calculate rail fare rises, and dropped to 2.5% last month from 2.6% in June. Increases are traditionally capped at RPI+1% – although train operators may raise fares on some routes by an extra 2%. That means some rail fares could increase by up to 5.5%.
"This further eases the pressure on the Bank of
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