Inflation down – house prices up

Inflation has dropped to just 1.5 per cent – its lowest for four and a half years.
The drop in the annual rate of price growth in May from 1.8 per cent in April was helped by the first annual fall in food prices since 2006.
Economists believe the fall in the Consumer Prices Index (CPI) measure of inflation may give the Bank of England more flexibility in holding off interest rate rises this year – good news for housebuyers and those seeking to remortgage.
The new inflation figures were released by the Office for National Statistics today.
Experts believe a supermarket price war may be behind the 0.6 per cent fall in food prices in May.
The ONS said other goods including drinks and clothing also fell in value as well as air fares.
Bank of England governor Mark Carney last week hinted that the first rise in the base rate of interest could come sooner than expected – possibly in the autumn.
It is the sixth month in a row that inflation is below the Bank’s 2 per cent target and lifts pressure on the Bank to increase the historic low interest rate of 0.5 per cent.
Separate figures from the ONS also showed a continued rise in house prices – a 9.9 per cent increase in the 12 months to April up to £260,000.
The rate of inflation, as measured by the Retail Prices Index (RPI) fell to 2.4% in May from 2.5% in April. RPI includes housing costs such as mortgage interest payments and council tax but CPI does not.
Visit http://www.bbc.co.uk/news/10612209 for more about inflation.