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Inflation falls to 2.2pc

Sam Cordon

November 12, 2013

The largest contributors to the fall in inflation came from transport largely led by a drop in fuel costs and education which was driven by a fall in tuition fees.

Martin Beck, UK economist for Capital Economics, said: “October’s inflation figures suggest that the UK economy is hitting a sweet spot of accelerating GDP growth and declining price pressures. And inflation is likely to fall further in the near future.

“With the Monetary Policy Committee’s forward guidance focusing markets’ attention on the unemployment rate, falling inflation may have a smaller effect on interest rate expectations than in the past.”

He added: “Rate expectations could still rise if tomorrow’s Inflation Report reveals a faster fall in the unemployment rate than previously predicted.”

Beck said that today’s figures should at least provide some reassurance that the inflation knockout to forward guidance is unlikely to be triggered in the foreseeable future.

And, he added, low inflation should help the MPC to emphasise that the 7% threshold is a way station rather than an automatic trigger for higher interest rates.

Meanwhile the CPIH, the index which takes into account the costs of housing, grew by 2.0% in the year to October 2013, down from 2.5%.


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