Wednesday, June 20th 2012 - 06:24 UTC

UK inflation drops to 2.8% in May pushed by lower fuel and food prices

UK rate of inflation fell last month to a two-and-a-half year low owing to slowing fuel and food prices. The Consumer Prices Index (CPI) measure fell to 2.8% in May from 3% in April, the Office for National Statistics (ONS) said.

BoE could be considering a “shot” of liquidity to boost the economy, say experts

The Retail Prices Index (RPI) measure fell to 3.1% from 3.5% in April. Inflation has fallen from 5.2% last September due to the waning impact of the VAT rise in 2011 and falling energy, food and commodity prices.

The fall in inflation was unexpected as the consensus among economists was that the rate would be unchanged in May. However, analysts said price rises were likely to slow further in the coming months.

“Expect further falls in inflation as energy bills rise less over the summer versus last year,” said George Buckley at Deutsche Bank.

”The fall in CPI inflation to 2.8% in May increases the likelihood at the margin of more quantitative easing (QE)... We expect £50bn with a sizable risk of a 25 basis point rate cut to boot.“

The current level of QE, a mechanism to pump money into the economy to try and stimulate growth, stands at £325bn and was last increased by the Bank's Monetary Policy Committee in February.

The May inflation figures show that consumers are starting to benefit from a fall in recent months in the cost of crude oil.

Average diesel prices also decreased, dropping 4.4p to 143.3p between April and May, compared with a 0.7p rise last year to 141.5p.

The Bank of England has predicted that CPI inflation will remain above the 2% target rate ”for the next year or so“.

Last month, inflation moved to within 1% of the target, meaning Bank of England Governor Sir Mervyn King did not have to send an open letter of explanation to the Chancellor, George Osborne.

An open letter is triggered if the CPI rate remains above 3% or below 1% for three months in a row.

A Treasury spokesman said: ”Inflation is out of Open Letter territory for the second month in a row, which is good news and is providing some welcome relief for family budgets.”

In further evidence that the weak economic climate is forcing retailers to cut prices to draw in customers, food and drink prices rose by just 0.3%, compared with a much steeper 1.3% rise last year.

The ONS said this was driven by declines in the price of fruit, particularly grapes, bananas, peaches and nectarines. The price of vegetables, mineral waters, soft drinks and juices also fell.

The most significant upward pressure on inflation, the ONS said, came from air and sea fares. But these were distorted by the timing of Easter in 2011 and 2012 and the subsequent difference in the timing of school holidays.

Air fares rose 1.4% in May, compared with an 11.1% drop last year, while sea fares rose 2.6%, compared with a 14.7% fall last year. (BBC).-
 

Published in: Economy.

9 comments Feed

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1 Self Determination (#) Jun 20th, 2012 - 07:08 am Report abuse
2.8% inflation? Argentinas 24% hammers us,although the liars say its 9.9% .Argentina world leaders in inflation !
2 brit abroad (#) Jun 20th, 2012 - 08:41 am Report abuse
Wont find many RG's posting on here i guess!
3 briton (#) Jun 20th, 2012 - 12:04 pm Report abuse
nope,
as we re grow,
they sink into the abyis
4 LEPRecon (#) Jun 20th, 2012 - 12:08 pm Report abuse
@2 - Brit abroad, I suppose we won't as this story completely contradicts everything that they are taught at La Campora HQ, namely that everything in RG land is fine and the UK is sinking faster than the Belgrano.

Aw I miss the Argtards. It's no fun if you can't bait them.

I suppose I'll channel Think.

“ARRRGGGGG! Brit Pirates!!!! AAAARRRRGGG!

UK IS FINISHED!!!! ARRRGGGGG!”

There, that's better isn't it? LOL
5 Doveoverdover (#) Jun 20th, 2012 - 04:41 pm Report abuse
Well, I'm disappointed seeing as how I'm on one of those magic CPI linked golden pension thingies my generation awarded itself.
6 cLOHO (#) Jun 20th, 2012 - 05:15 pm Report abuse
Nope no trolls on this one, until maximo instructs them.
7 Conqueror (#) Jun 20th, 2012 - 05:22 pm Report abuse
@4 Isn't that Malviner01? Presumably named because he plans to be the first argie to step ashore during the next invasion..........as if. He'll be at home. Cheering on his “brave and patriotic” troops as they get mown down and turn the South Atlantic pink. Not red. Not sure of the colour of argie blood, but there's a lot of water in the South Atlantic! Mind you, after looking up information on ocean currents, it seems likely that most of the water in the South Atlantic comes from the North Atlantic. Which means it's OURS! Can we not stop argies sailing about in our water?
8 LEPRecon (#) Jun 20th, 2012 - 10:21 pm Report abuse
@7 - Conquerer,

I thought they were all one and the same person anyhow. I mean, funds are tight, they can only afford one Argtard, and just give him multiple pseudonyms to login under. :0)
9 cLOHO (#) Jun 21st, 2012 - 12:14 pm Report abuse
haha Danys Burgers is active again, although can only imagine he works part time and is not top troll as he is very unstable and rambles utter rubbish. My fav troll is British K he or she or it works dam hard, maximo must reward him well with food vouchers.

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