‘Decline in Inflation Eases MPC Dilemma’

May 24, 2012 /

Consumer Price Indices (CPI) annual inflation stand at 3.0 per cent in April 2012, down from 3.5 per cent in March, the Office of National Statistics reports.

The timing of Easter had a significant impact on the April data. Air transport, off-sales of alcohol, clothing and sea transport were the most significant drivers behind the decrease in annual inflation between March and April. Partially offsetting these were smaller upward pressures from the operation of personal transport equipment, restaurants & hotels and rents.

Menawhile, RPI annual inflation stands at 3.5 per cent in April 2012, down from 3.6 per cent in March. The largest downward pressures to this change came from alcoholic drinks, clothing, fares & other travel and the purchase of motor vehicles. Partially offsetting these were upward pressures from housing and petrol & oil.

Commenting on the Office of National Statistics’ April Consumer Price Indices, KPMG Chief Economist, Andrew Smith, said: “Amidst the gloom, some good news at last. In the face of recent hiccups, confirmation that the inflation rate has resumed its downward trend is extremely welcome – not least to the Monetary Policy Committee which has appeared increasingly stymied by the co-existence of both a weak economy and sticky prices.

“The fall puts inflation back on track to hit the two per cent target sooner than the Bank of England’s forecast of mid-2013 and paves the way for further quantitative easing to support growth.

“But in the meantime households continue to struggle. Real wages are still falling and the headwinds of elevated unemployment, low wage growth and high inflation look set to remain a drag on the economy for some time to come.”


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