By Daniel Hunter

David Kern, Chief Economist at the British Chambers of Commerce (BCC) has said the slight drop in inflation is good news, but warns that the Monetary Policy Committee must still remain cautious.

The Office for National Statistics has released data that shows the rate of consumer price index (CPI) inflation has fallen to 2.8% in July.

The Bank of England's target for CPI inflation is 2%, and the latest reading is down 0.1% from June's 2.9%.

“At a time when earnings growth is weak and the government is pressing ahead with its austerity measures, any fall in inflation eases the pressure on businesses and consumers," Kern said.

"There is now greater hope that increases in inflation above the 3% mark will be avoided, but the situation remains uncertain and renewed surges in energy prices could push inflation up again.

“Businesses need long-term reassurance when making decisions that affect their company. With this in mind, we hope that the MPC rejects initiatives such as adding to QE that could add to inflationary pressures. The UK economy is now recovering at a moderate pace, and we would urge the government and MPC to do everything possible to sustain recent positive trends.”

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