Tuesday, October 13, 2009
Downside surprise on inflation: 1.1%
Posted by David Smith at 10:00 AM
Category: Thoughts and responses

Inflation did not fall quite far enough for Mervyn King to have to write a public letter of explanation but the drop to 1.1% was more than the markets expected, the first time this has happened for quite some time. It fell from 1.6%. RPI inflation was negative by 1.4%, from 1.3%, while RPIX inflation, excluding mortgage interest payments, dropped from 1.4% to 1.3%.

The big price falls were in essentials; gas and electricity, food and non-alcoholic drink. This probably represents the inflation low point but suggests next year's post-VAT peak will be lower than some feared. More details here.