18/06/2002

UK inflation rate falls below two per cent

Official figures from the Office for National Statistics (ONS) has revealed that the UK inflation rate fell sharply last month to 1.8% in May from 2.3% in April.

The fall, the steepest month-on-month fall in nine years, makes an early increase in interest rates less likely> But, the Bank of England is widely expected to put up borrowing costs before the end of the year in order to stop heavy growth in house prices and strong consumer spending.

The ONS said the fall in inflation last month reflected a dip in seasonal food and petrol prices last month compared with May 2001.

The headline rate of inflation, which includes mortgage repayments, also slipped lower, falling from 1.5% in April to 1.1% in May.

This was lower than the 1.3% headline rate predicted by many analysts.

(MB)

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