Inflation eases slightly

Britain's underlying inflation rate has dropped to its lowest level since June, official figures showed today.

For September, underlying inflation (RPIX), which excludes mortgage interest payments, stood at 2.8%, down 0.1% from the month before, the Office for National Statistics reported.

Although RPIX eased slightly, it still stood above the government's inflation target of 2.5% for the 11th month running. But the Bank of England attributes the current bounce to temporary factors and sees the underlying rate falling back in the coming months.

"They are dull numbers, but they reinforce the view that there's not a lot of inflation out there at the present time. That's good news for the Bank of England and interest rates," Simon Rubinsohn, chief economist at Gerrard, told Reuters.

Earlier this month, The Bank's monetary policy committee left interest rates unchanged at 3.5% for the third month running. But with growing signs of a pickup in economic growth, the City widely expects the MPC to raise rates some time soon, perhaps before the end of the year.

In today's data, the biggest downward effect on inflation was from clothing and footwear, particularly women's outerwear, with prices rising less than last year when new stock was introduced. Another dampening effect came from fares and other travel costs, as the ONS included a specific index for air fares for the first time this year.

The largest boost to prices came from seasonal food, as hot weather pushed up prices of fresh vegetables. Seasonal food jumped 3.3% on the month to stand 8.3% higher than a year earlier, the strongest number since March last year.

Headline inflation (RPI), which includes mortgage interest payments, also stood at 2.8% last month, down from 2.9% in August. It was the lowest RPI reading since November last year.

The harmonised index of consumer prices (HICP), which the government plans to switch to at the end of the year to fall into line with the eurozone, came in at just 1.4% for the second month running, well below the likely target of 2%. The difference between the two measures is due to the fact that HICP - unlike RPIX - does not take into account house prices.