Tuesday, June 16, 2009
Inflation falls - still above target
Posted by David Smith at 09:45 AM
Category: Thoughts and responses

Consumer price inflation fell from 2.3% to 2.2%, higher than expected and still above the official 2% target. Excise duty increases in the budget, together with increases in the prices of electronic goods, DVDs, etc. were responsible for the smaller than anticipated fall. Part of the reason may be that retail sales have held up better than expected. Most is explained by the temporary effects of sterling's fall, now partially reversed.

While some will see these figures as evidence of an incipient UK inflation problem that would be a mistake. The sterling effect will wear off and inflation stay low for a considerable time. RPI inflation was negative by 1.1%, compared with 1.2% in April. RPIX inflation, the old target measure, was 1.6%, compared with its old 2.5% target. More details here.