PRICES MUST DROP NOW INFLATION HAS FALLEN

'First fruits of difficult decisions'

- Sam Lister

JEREMY Hunt has called on retailers to speedily pass on cost reductions and lower prices to hardpressed consumers.

As the inflation rate fell to 7.9%, its lowest level in a year, the Chancellor hailed the "first fruits" of "difficult decisions" taken to control living costs.

It raised hopes that the Bank of England will opt for a smaller interest rate rise next month. The Chancellor said as costs are falling they should now be passed on.

He said: "The prices charged by producers are coming down - what are called factory gate prices we want to make sure that supermarkets and other retailers are passing those on to families as quickly as possible because people are feeling a lot of pressure."

He said the Government was not complacent, stressing the need to "stick to the plan" to control inflation: "The Bank has taken very difficult decisions and the Government has taken very difficult decisions in the autumn statement to make sure that we really do start to bring down inflation.

"We are seeing the first fruits of that but there's a long way to go." Office for National Statistics data yesterday showed the Consumer Prices Index fell to 7.9% last month from 8.7% in May.

That is the lowest since March last year, after food price inflation eased and fuel prices fell sharply year-on-year. Most economists had expected a June figure of 8.2%.