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Inflation falls to lowest levels since 2008

16 September 2014

The level of inflation has fallen to 1.5% which is the lowest level for many years.  This has been due to falling food and petrol prices.  Clothing, transport and Alcohol has gone up but not enough to offset the drop.  Falling world oil prices and aggressive price wars in the supermarkets may yet have further to go.  

It means the Bank of England is under even less pressure to raise interest rates in order to keep CPI inflation at or below its target rate of 2%.

Retail Price Index (RPI) inflation also saw a reduction, to 2.4%, from 2.5% the previous month.

The outlook is uncertain for many reasons.  Currency risks due to the possibility of an independent or even heavily devolved Scotland are worrying the exchange rate markets to a degree but this is likely to be determined on Thursday.  

The Inflation is still above average earnings growth which is running at 0.6% so politically the cost of living and affordability is still very much in the forefront of peoples minds.

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