Inflation stays over 3%

UK inflation dropped marginally to 3.1% in July but remains well above the Government's 2% target.

The Office for National Statistics data means Bank of England governor Mervyn King will have to pen yet another letter to the Chancellor. The consumer price index (CPI) rose on an annual basis by 3.1% in July, a drop on June's 3.2% but some distance from the Bank's target. The retail prices index, which includes housing costs, fell to 4.8% last month from 5% the previous month. The cost of living is being pushed higher by increased energy costs, rising food prices and the return of VAT to 17.5%, from 15% a year ago. King said last week the CPI was likely to be higher than previous...