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British Inflation Falls Sharply

June 18, 2002

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LONDON (AP) _ A drop in food prices helped spur a sharp decline in a key measure of British inflation to 1.8 percent last month, its lowest level since the government started tracking the statistic 27 years ago.

The government said Tuesday that underlying inflation in May was 0.5 percentage point lower than in April. May’s rate was the lowest since November, and represents the biggest month-on-month fall since October 1993.

Britain’s underlying inflation _ which excludes mortgage interest payments _ has not been lower since the Office for National Statistics began its current series of measurements in 1975.

Inflation including mortgage interest payments fell 0.4 percent to 1.1 percent.

The government said food prices fell 0.3 percentage points. Lower gas and newspaper prices also contributed to lower inflation.

The Bank of England, Britain’s central bank, has predicted that inflation will remain relatively steady until the latter part of 2003, but says it may have to raise its key interest rate _ currently at 4 percent _ if a consumer spending boom continues.

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