Tuesday, November 12, 2013
A welcome drop in inflation
Posted by David Smith at 12:00 PM
Category: Thoughts and responses

Inflation has been stuck at around 2.75% for slo long that today's news of a drop to 2.2% in October (from 2.7% in September) was welcome. A drop in petrol prices and the fact that tuition fees rose by less than last year were the main factors. This is the closest inflation has been to target since Mark Carney took over as Bank of England governor in the summer and provides a nice backdrop to tomorrow's inflation report.

Carney said recenetly that the rise in emergy prices would be broadly offset by other factors. That might allow the Bank to say tomorrow that inflation will be close to the 2% target next year. Michael Saunders at Citi, the investment bank, expects inflation to average 2% next year.

If thta occurs it won't end Labour's "cost of living crisis" but it will take the sting out of it, as does EdF's announcement today that it is raising prices by only 3.9% in January because it expects an easing of so-called green costs from the government.

All measures of inflaton fell in October, with the CPI rate including owner-occupiers' housing costs dropping from 2.5% to 2% and RPI inflation falling from 3.2% to 2.6%. Though inflation may jump around a little in the next couple of months, a return to target no longer seems as distant as it once did. More here.