Inflation drops to its lowest rate in over a year

15 - 11 - 2013

The UK’s inflation rate, as measured by the consumer prices index (CPI), fell to its lowest level in over a year, dropping from 2.7 per cent in September to 2.2 per cent in October.

The figures surpassed economists’ expectations, who forecasted that the rate would fall to 2.5 per cent.
Almost back at the 2 per cent target set by the government, the figure alleviates the pressure on the Bank of England to raise historically-low interest rates.

Transport prices, which fell by 1.5 per cent between September and October, majorly contributed to the drop, according to the Office for National Statistics (ONS).#

A petrol pump war brought the price of a litre of fuel down by 4.9p during October and some air fares also fell during the same period.
Another factor that contributed to the dip was the smaller year-on-year impact of rising university tuition fees.

‘On the path to prosperity’

A spokesperson for the Treasury said: ‘Inflation has fallen to well below half of its 5.2 per cent peak. With the help of the ongoing freeze in fuel duty that has kept petrol prices 13p per litre lower than they otherwise would have been, petrol prices are now at their lowest level since July 2012.

‘Britain’s hard work is paying off and the country is on the path to prosperity. Thanks to the government’s long-term economic plan, all parts of the economy are growing, the deficit is falling and jobs are being created.’

‘Falling petrol and diesel prices’

Economist Rob Carnell at global financial institution ING also pointed to falling petrol and diesel prices, saying they have ‘done the most to drag the inflation rate down’.

He added that ‘ongoing softness’ in Brent crude prices means ‘there may be a little more of this to come in the months ahead’

‘Sustainable upturn in the economy’

Chief economist at financial information services company Markit said the drop in inflation will provide ‘greater scope for monetary policy to be kept looser for longer’ and would ultimately ensure a ‘sustainable upturn in the economy’.

‘Lower inflation reduces the risk of the Bank of England having to hike rates earlier than it may otherwise prefer to, allowing policy to focus on stimulating growth rather than warding off inflationary pressures,’ he said.








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Foremans LLP