Inflation holds steady in surprise result

The Consumer Prices Index (CPI) showed no change for July, remaining at the previous month’s level of 1.8 per cent.

Meanwhile, official figures also showed that the Retail Prices Index (RPI), another inflation measure which includes property prices, came in from -1.6 to -1.4 per cent.

The results are likely to come as a surprise to many analysts, who had predicted that the downwards pressure on asset prices caused by the credit crunch and recession would lead to continued falls in inflation.

However, the Office for National Statistics (ONS), which released the data, confirmed that the indices had been buoyed by increases in DVDs and CDs.

These rises cancelled out the falls noted elsewhere for items including food.

CPI has previously gone ’below zero’, signalling falling prices, in nations including the US and Japan.

Economists worry about prolonged periods of deflation, which have the potential to lengthen and deepen economic downturns.

This is because consumers and businesses, confronted by falling prices, often decide to put off purchases of goods and services in the hope that they can get them cheaper at a later date.ADNFCR-2318-ID-19317926-ADNFCR