Inflation finally starts to fall
The UK Office for National Statistics yesterday reported that the headline inflation rate had its biggest 1-month decline in the past 10 years.
The CPI year-on-year rate was reported at 4.5% higher in October compared to a 5.2% annual rise in the year to September. The core CPI number (which does not include price moves in energy, food, alcohol and tobacco) also fell, from 2.2% in September to 1.9% in the year to October.
Even though the headline figure is still well above the BoE target rate of 2%, the expectation is for similar falls to occur over the next few months. This will enable CPI to hit the 2% by spring next year.
The problem then, as flagged and acknowledged by the BoE in its Inflation Report, is that the fall will not stop there and we are quite likely to see the headline rate fall to zero during 2009. This will create a whole new raft of problems for the MPC and Treasury.
This trend in prices data will be mirrored in all the major economies as lower rates and easier commodity prices filter into the respective economies. Therefore expect to see similar falls in inflation in the Eurozone, US and Canada over the coming weeks.
Officials around the globe are already beginning to douse expectations for continued large cuts in interest rates with both Trichet and the Fed's Stern questioning the wisdom and long-term benefits of further large cuts in their respective currencies.
Today we have a fun-packed day in prospect with minutes from both the last meetings of the MPC and Federal Reserve scheduled as well as an anticipated gloomy survey on Industrial Trends from the CBI. This afternoon, prior to the Fed minutes release, we get US CPI and Housing Starts.
The CBI report is likely to make grim reading especially given the recent proliferation of downbeat Corporate trading statements. The survey number itself will undoubtedly hit a new low for this cycle (expected -41 from last month's -31) but will remain well above the all time low for the survey of -61 recorded back in October 1991.
Trouble is that the figure is still heading the wrong way and so the question is now being asked, "Is this recession worse for British Business than the downturn in the early 90s?" This indicator MUST be watched for the answer.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
The CPI year-on-year rate was reported at 4.5% higher in October compared to a 5.2% annual rise in the year to September. The core CPI number (which does not include price moves in energy, food, alcohol and tobacco) also fell, from 2.2% in September to 1.9% in the year to October.
Even though the headline figure is still well above the BoE target rate of 2%, the expectation is for similar falls to occur over the next few months. This will enable CPI to hit the 2% by spring next year.
The problem then, as flagged and acknowledged by the BoE in its Inflation Report, is that the fall will not stop there and we are quite likely to see the headline rate fall to zero during 2009. This will create a whole new raft of problems for the MPC and Treasury.
This trend in prices data will be mirrored in all the major economies as lower rates and easier commodity prices filter into the respective economies. Therefore expect to see similar falls in inflation in the Eurozone, US and Canada over the coming weeks.
Officials around the globe are already beginning to douse expectations for continued large cuts in interest rates with both Trichet and the Fed's Stern questioning the wisdom and long-term benefits of further large cuts in their respective currencies.
Today we have a fun-packed day in prospect with minutes from both the last meetings of the MPC and Federal Reserve scheduled as well as an anticipated gloomy survey on Industrial Trends from the CBI. This afternoon, prior to the Fed minutes release, we get US CPI and Housing Starts.
The CBI report is likely to make grim reading especially given the recent proliferation of downbeat Corporate trading statements. The survey number itself will undoubtedly hit a new low for this cycle (expected -41 from last month's -31) but will remain well above the all time low for the survey of -61 recorded back in October 1991.
Trouble is that the figure is still heading the wrong way and so the question is now being asked, "Is this recession worse for British Business than the downturn in the early 90s?" This indicator MUST be watched for the answer.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: inflation, UK interest rates, UK recession
posted by Dr Search- Principal Consultant at the Search Clinic @ 2:53 PM
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