Tuesday, January 17, 2012
Inflation down to 4.2%
Posted by David Smith at 09:40 AM
Category: Thoughts and responses

The fact that the fall in inflation in December, from 4.8% to 4.2%, was more or less in line with expectations does not mean it was unwelcome. We went through a period of many months when inflation came in well above expectations and the Bank of England looked to be in danger of losing control of it.

At 4.2% of course, inflation is still more than double the official target and RPI inflation only came down from 5.2% to 4.8%. The squeeze on real income remains. There are reasons, however, to expect it to ease in the coming months, including the January 2011 VAT hike dropping out of the comparison and lower household energy prices. More here.