Oct 16, 2024 09:21 PM
https://inews.co.uk/opinion/dont-celebra...TO=newsnow
EXCERPT: . . . This decline in the consumer price index means that the UK now has lower inflation than the eurozone, at 1.8 per cent, and the US, where the headline rate is 2.4 per cent – though were it calculated on the same basis as the UK and Europe, it would be somewhat lower than that.
This is a cause for celebration, not just because inflation is below the Bank of England target of 2 per cent, but it is also below the Bank’s own projection of 2.1 per cent.
There is, however, a catch. This decline is driven by the fact that goods prices are actually lower than they were a year ago, and that there were some special factors at play, such as much lower airline fares and a fall in fuel prices at the pumps.
Inflation for the all-important services sector is still up 4.9 per cent year-on-year, and getting that down further will be crucial to inflation staying at or close to 2 per cent in the months ahead.
That movement in inflation through next year will determine how much further interest rates are likely to fall. At the moment the markets are also pricing in another cut from the Bank in December, which would bring its base rate down to 4.5 per cent.
This expectation has helped trim the value of the pound against the dollar – now down to $1.30 – though it has held up against the euro, largely because the European Central Bank is expected to cut its rates tomorrow.
But looking into next year, the picture clouds over. If inflation were to push up significantly above the 2 per cent level, that might not lead to an immediate rise in rates but it would stymie any further falls... (MORE - missing details)
EXCERPT: . . . This decline in the consumer price index means that the UK now has lower inflation than the eurozone, at 1.8 per cent, and the US, where the headline rate is 2.4 per cent – though were it calculated on the same basis as the UK and Europe, it would be somewhat lower than that.
This is a cause for celebration, not just because inflation is below the Bank of England target of 2 per cent, but it is also below the Bank’s own projection of 2.1 per cent.
There is, however, a catch. This decline is driven by the fact that goods prices are actually lower than they were a year ago, and that there were some special factors at play, such as much lower airline fares and a fall in fuel prices at the pumps.
Inflation for the all-important services sector is still up 4.9 per cent year-on-year, and getting that down further will be crucial to inflation staying at or close to 2 per cent in the months ahead.
That movement in inflation through next year will determine how much further interest rates are likely to fall. At the moment the markets are also pricing in another cut from the Bank in December, which would bring its base rate down to 4.5 per cent.
This expectation has helped trim the value of the pound against the dollar – now down to $1.30 – though it has held up against the euro, largely because the European Central Bank is expected to cut its rates tomorrow.
But looking into next year, the picture clouds over. If inflation were to push up significantly above the 2 per cent level, that might not lead to an immediate rise in rates but it would stymie any further falls... (MORE - missing details)