UK Rate Of Inflation Continues To Fall
In response to the recent rise in interest rates, the UK rate of inflation for May fell from 2.8% to 2.5%, the lowest rate for some 7 months. The performance of the retail price index (the main statistic used when considering wages increases) was a little less impressive, falling from 4.5% to 4.3% in May. There is much scepticism about the RPI and inflation figures, as the authorities have a tendency to add or remove certain items in order to give the best figures.
However, there is no doubt that the continuing policy of using interest rates as a battering ram to stall consumer spending is beginning to have a marked effect. Normally you would expect these figures announced today to signal the top of the interest rate cycle, however the property market is still fairly robust, and more interest rate rises are expected.
There is some concern that the headline figures announced today have been unduly effected by the reduction in utility bills, which have shown a substantial fall over the last couple of months - after rising sharply towards the end of last year, and earlier this year. Continued problems in the middle east are still exerting some pressure on the price of oil, with further petrol price rises expected in due course (together with the knock on effect on the economy, regarding transport costs, etc).
Today’s news has been well received, but there is still much work to be done.
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