Inflation expected to fall slightly to 2.5% in August

Inflation is expected to have fallen slightly in August when official figures are released today from the Office for National Statistics (ONS).

The consumer prices index (CPI) measure of inflation is expected to have fallen to 2.5 per cent after jumping in July to 2.6 per cent from 2.4 per cent in June.

Last months’ unexpected rise was due to price increases in air fares, footwear and clothing.

The retail prices index (RPI) measure of inflation which includes housing costs such as mortgage repayments and rental costs jumped from 2.8 per cent to 3.2 per cent.

Inflation has been declining for most of 2012 after the CPI reached a peak of 5.2 per cent in September 2011.

This month is expected to see a marginal fall despite renewed price pressure from oil and petrol prices.

Most analysts do not expect to see inflation fall much further in the next six months because high oil prices and increases in the cost of utilities are expected, causing upward inflationary pressures.

Today’s inflation data will also see the publication of the minutes of the Consumer Prices Advisory Committee (CPAC) meeting.

These will be closely watched in UK inflation related markets because they could lead to a possible change in the formula used to calculate RPI, which could result in the RPI losing 0.9 of the annual RPI inflation rate depending on how the committee decides to apply alterations.