Tuesday, June 19, 2012
A pleasant surprise on inflation
Posted by David Smith at 11:00 AM
Category: Thoughts and responses

The drop in consumer price inflation from 3% to 2.8%, its lowest since November 2009, was a very pleasant surprise. The Bank of England had expected the rate to remain at 3% or above over the summer. Falling petrol prices are making a big difference, as are lower food prices.

Retail price inflation also fell significantly, from 3.5% to 3.1%. According to the Office for National Statistics: "The largest downward pressures to the change in RPI annual inflation between April and May came from petrol & oil and food. Partially offsetting these was an upward pressure from other travel costs which includes air transport."

Core consumer price inflation, excluding food, energy and tobacco, edged up from 2.1% to 2.2%, though it was running at nearly 3.5% last autumn. So generally good news. Inflation may be starting to act as it should given the weakness of growth. More here.