Inflation falls unexpectedly in June as sales come early Inflation is expected to fall closer still to the Bank's 2pc target in the coming months, after peaking at 5.2pc in September last year. "We think that CPI inflation could be below 1pc by the end of the year - and is likely to stay very low throughout next year," said Vicky Redwood, chief UK economist at Capital Economics. The retail prices index, which includes mortgage costs, fell 3.1pc to 2.8pc in June, which was the lowest level since December 2009. Falling inflation will also be a source of huge relief for policymakers at the Bank of England, following persistent inflation overshoots since the end of 2009. It also provides breathing room for the Bank's Monetary Policy Committee to expand QE further should the outlook for the economy worsen. "We certainly would not rule out further QE by the Bank of England later this year, although the economy will hopefully grow in the third quarter as it is helped by the Olympic Games and by the making up of some of the activity lost in the second quarter due to the extra day's public holiday," said Howard Archer, chief UK economist at IHS Global Insight.