Rate cut hopes rise on record inflation fall to 4.5%

amcluesent

"Inflation tumbled at a record pace in October to 4.5 per cent, down from the 16-year peak of 5.2 per cent in September. The bigger-than-expected fall in inflation helps to explain the Bank of England's dramatic 1.5 per cent rate cut.

Analysts say that the figure paves the way for more rate cuts.

The Bank expects inflation to fall sharply towards its 2 per cent target, and forecasts that it could drop below this level to as low as 1 per cent next year. Jonathan Loynes, of Capital Economics, said that deflation could be in the cards as inflation dips below zero."

More pain on the way for savers!

MSEers shouldn't buy anything until after Xmas, the January sales will be spectacular.

Lokolo

My xmas list consists of a lot of vouchers, ready for the Jan sales

Does anyone know when RPI is calculated? I want to keep an eye on that to be honest, student loans and all.

luvpump

Great inflation has fallen from a 16 year high to a 10 year high !!! ... I.e prices are still going up people !!!

Reaper

Remember the Bank of England gets to see the preliminary inflation figures before we do. This should be seen as the explanation behind their surpise 1.5% cut rather than being a sign of another big cut on the way (though another, small cut is expected next month)

gozomark

luvpump wrote: »

Great inflation has fallen from a 16 year high to a 10 year high !!! ... I.e prices are still going up people !!!

the last time inflation was -ve in the UK (on a year-end basis) was 1933, so prices going up is normal (and if small, useful, hence why Central banks have inflation targets of greater than 0%)

Reaper

Negative inflation is seen as bad thing. The theory is that if people reckon what they were about to buy this month will cost them less next month they will delay spending. That in turn deepens the recession as people are buying less goods, firms lay off workers, people have less to spend etc and so it sprials on.

That is why the Bank of England's task is to stop inflation getting too high or too low.

Liz_the_Whizz

Lokolo wrote: »

My xmas list consists of a lot of vouchers, ready for the Jan sales

Does anyone know when RPI is calculated? I want to keep an eye on that to be honest, student loans and all.

hi lokolo,

RPI is out today - down to 4.2% in October from 5% in September.

gozomark

RPI (and CPI) are calculated once a month, and are released about 18 days into the following month

refusnik

Public does not understand what inflation means. 5% (per year) inflation means that £100 product becomes a £105 product after one year and stays the same £105 product indefinitely if inflation suddenly drops to 0% afterwards.

If level of RPI was above pay rises for so long we need some period of low RPI and high income rises to at least bring us back to the same level of spare income. There is no need for Broon to panic and scream.

We have not gone over a bump in retail inflation. We have driven up a ramp and we need to get down somehow eventually.

refusnik

Reaper wrote: »

Negative inflation is seen as bad thing. The theory is that if people reckon what they were about to buy this month will cost them less next month they will delay spending. That in turn deepens the recession as people are buying less goods, firms lay off workers, people have less to spend etc and so it sprials on.

I think it is pretty rubbish lobbying from some government insiders. Nobody is going to delay their purchase of milk just because it will cost 2p less in a year. A lot of non-essentials are overpriced, though and they have to come down one way or another. However, what is the percentage of non-essential purchases in this country economy? Not in most people's budget anyway and by that I mean voters' budgets.