Falling inflation good for recovery support

Falling inflation makes it easier for the Bank of England Monetary Policy Committee to support recovery, says the British Chambers of Commerce.

  • Annual CPI inflation in November 2014 was 1.0%, down from 1.3% in October – the lowest rate since Sept 2002
  • Falls in transport costs (notably motor fuels, air transport and second hand cars) and in the prices of recreational and cultural goods were the main contributors to the drop in inflation in November
  • Goods price inflation in November 2014 fell to -0.2%, while services inflation was 2.0%

Commenting on the CPI inflation figures for November 2014, published by the ONS on 16 December, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:

“The fall in inflation in November was larger than most had predicted and signals the lowest rate in over 12 years. It is now highly likely that inflation will fall below 1.0% in December. While weak energy and food prices are pushing down inflation, domestic pressures are also easing. A rise towards the 2.0% inflation target is unlikely until well into 2016.

“These figures will make it easier for the MPC to resist call for higher interest rates. The UK recovery is still facing challenges, so a prolonged period of low interest rates will help to underpin business confidence and support investment.”

Written on 16th December 2014Lillie Geistdorfer. Published in BCC, Economy, News