Inflation set to fall further, no grounds for rate rises
James Forder writes for CapX
“If last month’s 8.7 per cent annual increase in the CPI was unexpectedly high, this month’s 7.9 per cent is a shade lower than expected. This is mirrored in other indicators such as CPIH and core CPI.
“Since these figures were tallied, Russia has ended a deal to allow grain exports from Ukraine, which will likely push up global and UK food prices. Mortgage rates have also gone up. Nevertheless, since the extraordinary increases in the money supply that ultimately fuel inflation have ended, inflation is set to fall further.
“Rishi Sunak’s pledge to halve inflation by the end of the year may still be optimistic, but at least there are no grounds for the Bank of England to raise interest rates further. Nor are there any grounds for panic measures to hold down prices artificially, such as Grant Shapps’ silly initiative to curb supermarket petrol prices.”
Notes to Editors
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- CPIH, which includes owner-occupiers’ housing costs, is down from 7.9 per cent to 7.3 per cent.
- Core CPI, which strips out energy, food, alcohol and tobacco to give a clearer picture of underlying trends, was down from 7.1 per cent to 6.9 per cent.
- Reduced motor fuel and food prices drove the fall in CPI and CPIH, which were not offset by other price increases.
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