Inflation Just Keeps on Falling

Inflation has fallen once again this month, hitting its lowest level in over two years.  The consumer price index dropped from 3 to 2.8 per cent this month, with falling oil prices cited as the main cause.

The Office for National Statistics said that a 4.5p drop in petrol prices was the biggest factor influencing the figures, as the price of crude oil tanked from $120 to $83 per barrel. The retail price index, an alternative measure of inflation also fell from 3.5 to 3.1 per cent.

Food prices have also contributed to the fall according to the ONS, rising just 0.3 per cent, compared with 1.3 a year ago.

Although these figures remain well above the government’s target figure of 2 per cent, policy makers should receive some reassurance that they can take more action to stimulate the economy without causing a major price surge.

Sir Mervyn King, Governor of the Bank of England, hinted that a fresh round of quantitative easing could be on the cards, alongside other government measures to kick start credit.

Some members of the bank’s Monetary Policy Committee have expressed reservations about further QE, concerned about its effect on inflation; however, prices have been falling globally in recent months thanks to fears of further recession..

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