Inflation rises to 0.1% in July


Updated on 18 August 2015 | 1 Comment

And July RPI figure, which is used to set rail fares, stays at 1%.

The Office for National Statistics (ONS) has revealed that the Consumer Prices Index (CPI) measurement of annual price inflation increased to 0.1% in July

It had stood at 0% in June.

According to the ONS the main contributor to the rise was the fact that the cost of clothing fell by a smaller margin than a year ago. Clothing prices fell by 3.4% last month, compared to a 5.7% fall a year ago.

Other, smaller contributors were the price rises in transport services (particularly air fares), recreation and culture (notably computer games and consoles) and bank or overdraft charges.

RPI and rail fares

July’s inflation figures are particularly significant, as next year’s regulated rail fares increase in line with the month’s Retail Prices Index (RPI) figure. This is a different measurement of inflation, and in July stood at 1%, unchanged from the month before.

Regulated rail fares are the ones overseen by the Government, and cover things like season tickets on most commuter journeys, some off-peak return tickets on long-distance journeys and walk-up tickets around the nation’s major cities. Train companies are left to set the prices for their other fares – there is no explicit link to inflation.

The Bank of England has a 2% target for the CPI measurement of inflation. In its latest inflation report, it described the short-term outlook for inflation as “muted”, due in part to the falls in energy prices of the last few months and the appreciation in sterling.

[SPOTLIGHT]However, it believes inflation will get back to its target within the next two years, thanks to an improving employment market and “gently rising” Base Rate.

What it means for you

Inflation has been very low for a while now, even dropping briefly into the negative. This means that the general cost of living has not really changed from 12 months ago. So if your earnings have gone up, you’re better off, while if your earnings have stayed the same you are at least no worse off.

It is good news for savers though, as it means that getting an inflation-beating return on your savings is much easier, with most savings accounts now offering a real terms return. To ensure you get the best possible return, read Where to earn most interest on your cash.

Compare savings accounts with loveMONEY

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Where to earn most interest on your cash

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