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UK inflation falls less than expected in May

09:30 16Jun09 UK inflation falls less than expected in May

LONDON, June 16 - British consumer price inflation slowed much less than expected in May to remain above the Bank of England's 2.0 percent target for a 20th consecutive month, official data showed on Tuesday.

The Office for National Statistics said consumer prices rose 0.6 percent on the month in May. That took the annual rate to 2.2 percent from 2.3 percent in April and the lowest since January 2008 -- and below forecasts of 2.0 percent.

Besides the anticipated upward effect from tax rises for alcohol and tobacco in this year's Budget, the chief upward influences were from rising prices of DVDs, televisions, clothing and footwear.

British inflation has remained remarkably sticky despite much lower energy and commodity costs compared to last year and an economic recession, perhaps due to the weakness of sterling.

But policymakers still expect inflation to fall sharply over the coming months and, as such, the figures are unlikely to alter expectations that monetary policy will remain loose for a considerable period of time.

The annual RPI measure of inflation, on which many wage deals are based and which includes housing costs, unexpectedly rose to -1.1 percent in May from -1.2 percent in April. Analysts had predicted a drop to -1.5 percent.

As well as being affected by the same upward pressures as the CPI measure, May's RPI was also boosted by housing costs as average mortgage interest rate payments rose slightly.
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Replies

  • purchpurch Forumite
    9.9K Posts
    UK inflation falls less than expected in May

    Is that good or bad news ? ;)
    'In nature, there are neither rewards nor punishments - there are Consequences.'
  • British inflation has remained remarkably sticky

    No surprise really, it will be interesting to see the figures when the high oil price from last year works it's way out of the YoY figures, and lets not forget the rise in VAT that will come into effect after Christmas, seems all a bit contrived IMO, we have to keep IR's low at all costs, and we all know why that is don't we.
  • edited 16 June 2009 at 9:46AM
    inspector_monkfishinspector_monkfish Forumite
    9.3K Posts
    edited 16 June 2009 at 9:46AM
    purch wrote: »
    Is that good or bad news ? ;)

    well the Pound has just rocketed from 1.6340 to 1.6420 against USD, and from 1.1780 to 1.1840 against the EUR......
    Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
    (MSE Andrea says ok!)
  • caroltcarolt Forumite
    8.5K Posts
    Quelle surprise, the deflation they promised hasn't arrived - in fact it's retreating.

    No doubt, this will lead to a reversal of the policy of QE. :rolleyes:
  • Former_MSE_DanFormer_MSE_Dan Former MSE
    1.6K Posts
    1,000 Posts Combo Breaker
    Hi folks,

    If you're interested, we've written a brief MSE News article on this

    Deflation at -1.1% in May

    Cheers

    Dan
    MSE Web Editor, mainly responsible for looking after, and keeping up-to-date, ‘hard-core’ financial articles such as credit cards, savings and loans.

    If you spot a rate change that we haven't already mentioned or added into articles or tips, Please send me a PM about it




    Don't miss urgent MoneySaving, hear first by getting Martin's Money Tips Free E-mail at www.moneysavingexpert.com/tips
  • purchpurch Forumite
    9.9K Posts
    well the Pound has just rocketed from 1.6340 to 1.6420 against USD, and from 1.1780 to 1.1840 against the EUR......

    Yipeeeee !!! :T:j

    We have Inflation and you don't ..... nah nah ne nah nah !!!! :eek:
    'In nature, there are neither rewards nor punishments - there are Consequences.'
  • So is it good if you have cash in the bank even if not getting much interest?
  • RDB wrote: »
    So is it good if you have cash in the bank even if not getting much interest?


    nah, go out and spend it dude !!

    spend spend spend !!!!!
    Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
    (MSE Andrea says ok!)
  • MilarkyMilarky Forumite
    6.3K Posts
    Part of the Furniture 1,000 Posts Photogenic
    MSE_Dan wrote: »
    Hi folks,

    If you're interested, we've written a brief MSE News article on this

    Deflation at -1.1% in May

    Cheers

    Dan
    Yes, we are only now 'up to' April 2008 in terms of past BOE rate/mortgage cuts. There is another six months therefore until the first of the subsequent cuts (October 2008 - 0.5% reduction) will exit the RPI - that's when it gets 'interesting' again. (Expect a 'switch' in reporting from RPI to CPI to occur about then!)
    .....under construction....
  • Milarky wrote: »
    Yes, we are only now 'up to' April 2008 in terms of past BOE rate/mortgage cuts. There is another six months therefore until the first of the subsequent cuts (October 2008 - 0.5% reduction) will exit the RPI - that's when it gets 'interesting' again. (Expect a 'switch' in reporting from RPI to CPI to occur about then!)


    then followed by the big 150bp cut in November 2008 and 100bp cut in December
    Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
    (MSE Andrea says ok!)
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