Tuesday, April 17, 2012
Inflation rise wasn't part of the script
Posted by David Smith at 09:45 AM
Category: Thoughts and responses

The Bank of England thought a drop in inflation to the "low threes" by March was a dead cert, so the rise from 3.4% to 3.5% in consumer price inflation is a disappointment, only partly compensated for by an accompanying drop in retail price inflation from 3.7% to 3.6%. The fall in both measures of inflation is essential if the growth in real incomes is to be restored, thus supporting spending.

According to the Office for National Statistics: "The largest upward pressures to the change in CPI annual inflation between February and March came from food (particularly fruit, bread & cereals and meat), clothing and recreation & culture. The largest downward pressures to the change in CPI annual inflation between February and March came from electricity, gas & other fuels and transport.

The annual rate of RPI inflation was last lower in December 2009. "The largest downward pressures to the change in RPI annual inflation between February and March came from motoring expenditure and fuel & light. Partially offsetting these were upward pressures from food and clothing."

The Bank can no longer blame George Osborne for high inflation. CPIY, excluding indirect taxes, is 3.5% and on a rising trend, while CPI at constant tax rates is just below it. More here.