The UK inflation rate has fallen to a five year low at 1.2% in October which is aiding consumers in their search for cheaper goods and products.
The rate – as measured by the Consumer Prices Index – is the lowest since September 2009, when it was 1.1% with lower energy and food prices helping contribute to the fall with the Office of National Statistics (ONS) also saying that a drop in energy costs had been a serious factor.
A rise is unlikely to come about until next year which sent the pound lower on international markets with the pund falling against the Euro and the Dollar meaning that the price of foreign goods could well see a rise. Sterling is at $1.597, its lowest since November last year. The Retail Prices Index measure of inflation fell to 2.3% from 2.4% in August.
The Bank of England Targets the CPI as its rate and it is aiming to keep inflation around the 2% mark but with the British economy the fastest growing economy in the developed world, this would usually prompt a rise in interest rates but there is little sign of inflationary pressures taking hold anytime soon.
Some economists have speculated that the Bank of England may be inclined to raise rates before the end of the year as it currently sits at a record low 0.05% but most were under the impression a rise would come at the beginning of the following year. However, with things currently as they stand and a lack of inflationary pressures on the horizon, it is perfectly feasible a rate rise could be deferred even longer until the time is necessary.
Ben Brettell, senior economist at Hargreaves Lansdown, said: “With inflation predicted to fall further in the coming months, those hoping for a pre-election interest rate rise are highly likely to be disappointed.”
Fuel costs fell 6% in September whilst food prices are down by 1.5%, a likely side-effect of the supermarket price wars which are currently in full flow, according to ONS figures. The battle for supremacy by leading supermarkets is dragging food prices further down and is likely to have an effect to push down on inflation further in the coming weeks and months.
However, sales are at their weakest for around six years as the unseasonably good weather has put consumers off of seasonal clothing purchases but with falls in transport costs (notably sea fares and air fares) and lower prices for a range of recreational goods, including items such as tablet computers and games consoles and the impending Christmas period, this is all very likely to change.
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