Chocolate prices help hold inflation.

 

Price inflation is one of the most significant long-term threats to financial security.

 

Rising prices are rarely spotted at the time. But, with the benefit of hindsight over long periods, their impact can be devastating.

 

The latest official price inflation figures show that UK price inflation was at a three-year low in November.

 

The Consumer Prices Index (CPI) measure of price inflation was at 1.5% for the year to November, unchanged from a month earlier.

 

It means the official measure of price inflation was a little higher than the average expectation of economists last month, who expected it to slip back to 1.4% for the year.

 

In any case, inflation is well below the Bank of England target of 2%.

 

These latest figures mean the Bank is likely to consider an interest rate cut at their next Monetary Policy Committee meeting. With the results of the general election still fresh in their minds, and a degree of Brexit uncertainty removed, the Bank could vote to cut rates to support a faltering domestic economy.

 

It’s worth keeping an eye on these inflation announcements in light of the Bank’s forecasts. Only last month, the Bank of England predicted inflation falling to 1.25% by early next year, mainly as a result of caps on domestic energy and water prices.

 

Inflation is then forecast to rise to above the Bank’s 2% target in around three years.

 

When the Monetary Policy Committee met last month, two of its members voted for a rate cut. With a slowing labour market and an outlook for the global economy turning negative, a rate cut isn’t entirely unexpected.

 

The latest inflation figures were maintained at 1.5% due to higher prices for chocolate, concert tickets and package holidays, offset by lower prices for hotel rooms, and a smaller price rise for cigarette prices compared with a year earlier.

 

Another measure of inflation we monitor is core inflation, which strips out some of the more volatile goods and services, and is seen as a better indicator of price changes. It leaves out items including energy prices, fuel, alcohol and tobacco.

 

This measure of core price inflation held steady at 1.7% for the year to November.

 

Commenting on the latest inflation figures, TUC General Secretary Frances O’Grady said:

 

“Low inflation is a sign of our failing economy. Growth has been flat for three months, putting wages, jobs and living standards at risk.

 

“We need a new approach with a genuine end to austerity. No more excuses - the new government must boost living standards for working families and rebuild our public services.”

Print Print | Sitemap
© Asset & Investment Management Ltd

Call

E-mail