By Marcus Leach

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%.

The clothing and footwear sectors contributed to the headline rate fall, but a rise in petrol and diesel prices partially offset the fall.

The Retail Prices Index came down from 3.3% to 3.1%. This measure which also includes housing costs and is used to set January's rail fares at a rate of RPI plus 1%.

“Another win for Mark Carney today as inflation comes back towards target, although the quelling of recent pressures in oil markets may have helped things," Jeremy Cook, chief economist at the foreign exchange company, World First, said.

"Core inflation that excludes the volatile fuel element, alongside food, alcohol and tobacco, fell to 2% from 2.3% in further good news. Following last week’s re-engineering of monetary policy in the UK, courtesy of the Bank of England’s forward guidance plan, inflation and unemployment data are only going to become more important to the market performance of UK assets. These inflation figures suggest that the 2.5% caveat on an 18-month to 2-year time frame is still a long way off.

“The dip unfortunately means that, should average weekly earnings (excluding bonuses) increase tomorrow to 1.1% as expected, the differential between prices and wages is still 1.6% - a simply unsustainable gap.”

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