INFLATION LIKELY TO FALL DESPITE TEMPORARY SETBACK SAY BCC
August 14 2012.



- Annual CPI inflation up from 2.4% in June to 2.6% in July

- Annual RPI inflation up from 2.8% in June to 3.2% in July

Commenting on the inflation figures for July 2012 published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: "The inflation figures for July recorded an unexpected rise. Despite this setback, the downward trend in inflation seen in recent months is likely to continue. There is a realistic chance that inflation will be down to 2% by the end of the year, and will fall slightly below this target during 2013. However, the inflation figures for July show that there is no room for complacency. Recent increases in world food prices because of the drought in the US provide a reminder that there are still upward pressures.

"Since inflation has been above the 2% target for a prolonged period, a temporary fall below this target should not be a cause for concern. If inflation does fall, the economy would benefit since the squeeze on businesses and consumers would support demand in the economy. With this in mind, the Bank of England should not use additional Quantitative Easing, which concentrates solely on buying gilts, to limit temporary falls in inflation."