MercoPress. South Atlantic News Agency

Inflation under control

United States and United Kingdom seem to have inflationary pressures under control diminishing prospects of an interest rate rise in the coming months.

In United States retail prices remained unchanged during May according to the Labor Department official index. In April prices had increased 0,5% but with the May figure, annual inflation estimate dropped from 1,6% to 1,2%.

Analysts believe the lack of price pressures should delay any possible interest rate increase by the Federal Reserve.

"At this point inflation is not a threat", said Arturo Porcekansky from ING Investments.

The drop in energy prices was the most influential factor in the May index. Nevertheless the CPI index, that excludes energy and food prices, crawled 0,2%.

Similarly in Britain the underlying rate of inflation fell to 1,8% in May after reaching 2,3% in April. The drop is the steepest month on month fall in nine years, making a rise in interest rate unlikely.

According to Britain's Office for National Statistics, ONS, the drop in inflation in May reflected the seasonal decrease in food and energy prices.

Another encouraging signal was the headline rate of inflation, that includes mortgage repayments, and which dropped from an accumulated 1,5% in April to 1,1% in May.

The Bank of England's Monetary Policy Committee is expected to meet next July 3 and 4 to decide on interest rates, that now stand at a basic 4%, the lowest in 37 years.

In early May Bank of England governor Eddie George informed Parliament that if domestic demand did not moderate, particularly the double digit growth in house prices, interest rates would have to rise.