Britain's Consumer Prices Index (CPI) 12-month rate fell to 2.0 percent in July 2021, down from 2.5 percent in June, reaching the Bank of England's 2-percent target for inflation, the British Office for National Statistics (ONS) said, Trend reports citing Xinhua.
Data released by the ONS showed that the CPI including owner occupiers' housing costs (CPIH) 12-month inflation rate was 2.1 percent in July 2021, down from 2.4 percent in June.
"Clothing and footwear, and a variety of recreational goods and services made the largest downward contributions to the change in the CPIH 12-month inflation rate between June and July 2021," said the ONS.
Despite a fall in July, analysts forecast the inflation is expected to soar in coming months, but tightening of monetary policy is not likely anytime soon.
"July's drop in CPI inflation is likely to be followed by sharp rises in the next few months, taking inflation to a peak of about 4.5 percent by the end of the year," said Ruth Gregory, an economist at London-based economic analysis firm Capital Economics.
"But provided the spike in inflation does not feed through into higher inflation expectations or persistently faster pay growth, we do not think that the Bank of England will respond next year by tightening monetary policy," Gregory added.
James Smith, a developed markets economist at financial services firm ING, said the inflation "took a bit more of a tumble than expected in July -- but this feels remarkably like the calm before the storm."
Smith said much of the surprisingly sharp drop from 2.5 percent to 2 percent "can be put down to things like clothing prices, and to a lesser extent, household goods."
"These are temporary setbacks, and there's little doubt that headline CPI will go well above 3 percent later this year -- and in fact, the next set of data may confirm we got close in August," said Smith, adding that "it's not difficult to see inflation coming fairly near to the Bank of England's forecast of 4 percent in around November."
Smith said he believes goods inflation is expected to ease in the spring of next year and headline CPI will be "much closer to target by the middle of 2022."
"Barring a surprise surge in underlying wage growth over the winter, we don't think inflation will be a huge concern for the Bank of England," said Smith, adding that "any tightening is, therefore, unlikely to come before late 2022 or early 2023."
Earlier this month, the Bank of England forecast the inflation is expected to peak temporarily at 4 percent in the fourth quarter 2021, saying some "modest tightening" of monetary policy is likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term.
England has lifted almost all its remaining COVID-19 restrictions since July 19. Nearly 90 percent of the adults in Britain have received a COVID-19 vaccine, while more than 77 percent have had the second jab, according to the latest figures.
To bring life back to normal, countries such as Britain, China, Russia, the United States as well as the European Union have been racing against time to roll out coronavirus vaccines.