CPI Inflation down – releasing more presure on Bank Base Rate

CPI Inflation down – releasing more presure on Bank Base Rate

14:55 PM, 12th November 2013, About 10 years ago 9

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The Consumer Price Index CPI inflation figures for October show a year on year fall to 2.2% from 2.7% in September as released today by the Office for National Statistics (ONS).

This surprise fall means that the basket of goods and services measured under CPI which cost £100.00 in October last year would now cost £102.20. We are also now much closer to the Bank of England’s medium term target inflation rate of 2%, which inflation has been above since December 2009.

The Bank of England’s new forward guidance also indicated that it would not consider an increase in interest rates unless unemployment was also below 7%. We will know more when the Bank publishes it’s latest forecast tomorrow.

Although not directly related the European Central Bank also cut it’s rate from 0.5% to an all time low of 0.25% last week in an effort to alleviate fears of deflation (price falls) across Europe with inflation now running at 0.7% against a target of 2% as in the UK. A stalling European inflation rate will have some downward pressure on UK rates as they are our largest and closest trading partner.

The largest contributing sectors to the fall in CPI inflation came from transport (notably motor fuels) falling 1.5% and education (tuition fees) increasing by 8.2% down from 19.1% last year according to ONS figures. Falling transport prices may also have affected prices at supermarkets with food inflation falling from 4.8% to 4.3%.

However it is not all good news for inflation figures as the recent large price increases by energy suppliers has yet to take effect on, but economist are not predicting the Bank Base rate to be seriously reviewed even after the recent economic upturn until late 2015.

CPI Inflation


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Ian Simpson

15:00 PM, 12th November 2013, About 10 years ago


Housae Prices seem to be bucking the trend and currently sky-rocketing!!

Neil Patterson

15:17 PM, 12th November 2013, About 10 years ago

Funnily enough the latest ONS data for October house prices also shows the index fell from 186 in October to 184.9 in November.

Dan Smith

16:09 PM, 12th November 2013, About 10 years ago

Great article Neil, but my experience is the Government never give us a true account of inflation as we experience it in reality. Yes inflation is lower than it was, but prices are still rising, albeit slowly than before.

Utilities are going up, meat and veg are through the roof, phone bills, water bills are up. Petrol is high despite what they say. Energy prices have risen 137% since 06 - all we need now is wages to follow!

But I think its wise to say, wages in real terms have stayed stagnant or in fact fallen.In my opinion, inflation is A LOT higher than the calculation they try to fool us with - I'd put my house on it

Neil Patterson

16:24 PM, 12th November 2013, About 10 years ago

Hi Dan,

Yes you are quite correct. Wage inflation in general has fallen a long way behind CPI inflation/the cost of living.

Normally when you have inflation it is caused by demand from wages increasing (demand lead inflation), but this is inflation mostly caused by external forces out of our control. Without the normal proportional wage increases you are feeling the inflation even worse than you would have done in the past.

Hence your comments are understandable, but the ONS are actually independent from the politically elected government.

Polly Nottingham

19:36 PM, 12th November 2013, About 10 years ago

I agree with Dan.
It also depends on income level - if your domestic fuel costs are over 10% of your income you will notice the price increases more.
I would guess that a low-income family's 'basket' has a much higher inflation figure.

Dan Smith

11:43 AM, 13th November 2013, About 10 years ago

Hi Neil,

It's good to hear everything is getting cheaper and we have a lot more surplus cash in our pockets (and stop laughing -its rude) - because of these 'official figures' 🙂

Reading the article and the general news about the CPI, there appears to be a BIG misprint. They've inadvertently put a decimal point - it should read, "drops from 27% to 22%".

But in all seriousness, inflation is running at least 10% not the 2.2% this government/ONS would have you believe.

Just remember, when you can't afford to eat or keep warm it's simply an 'illusion' (and that's 'official' 🙂

Neil Patterson

15:55 PM, 13th November 2013, About 10 years ago

Reply to the comment left by "Dan Smith" at "13/11/2013 - 11:43":

Hi Dan,

The figures are year on year not cumulative so over the past 4 years the effect of inflation will seem much higher than the current figures.

Don't forget my disclaimer that the recent fuel price increases have not had an effect in these figures as well.

Alan Loughlin

10:18 AM, 16th November 2013, About 10 years ago

Reply to the comment left by "Ian Simpson" at "12/11/2013 - 15:00":

skyrocketing they are not except in a few central London locations, the rest of the country are seeing very modest rises, in fact some areas are still falling, exaggerating does not help.

Neil Patterson

14:45 PM, 17th December 2013, About 10 years ago

November ONS data shows inflation is now down to 2.1% however core inflation is up slightly to 1.8% from 1.7%.

So nothing to get excited about other than the presure is still off Interest rate rise with inflation at about target levels.

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