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Inflation: CPI up, RPI down to zero

Just published by the ONS at 9.30am today, the latest inflation figures show that the Consumer Prices Index (CPI) annual inflation  – which is the government’s target measure – rose by 3.2% in February. This was up from 3.0% in January.


This means that the CPI is moving away from the Bank of England’s 2.0% target, after the Bank has been telling us that this measure of inflation was going to fall sharply this year.


Why has it risen? According to the ONS the largest upward pressure was from food and non-alcoholic beverages, with the largest individual component being an increase in the price of vegetables.


The recent trend can be seen in the figure below.

Annual Inflation Rates - 12 month percentage change.  Source: ONS

Annual Inflation Rates - 12 month percentage change. Source: ONS


There were also other large, upward pressures on the CPI from recreation and culture, particularly toys and computer games; transport costs due to the price of petrol rising 3.2 pence per litre between January and February; household equipment, with rises in the prices of major appliances and household goods; and, clothing and footwear where prices rose by more than a year ago.


The only large downward pressure came from the fact that gas and electricity bills were unchanged this year after having risen a year ago.


The Retail Prices Index (RPI) fell to 0.0% in February, which was a fall from the 0.1% registered in January. This index was affected in much the same way as the CPI but with the exception of the downward pressure from housing as mortgage interest payments continued to fall reflecting the drop in base rates. These payments are excluded from the CPI index.


The latest international comparison shows that UK inflation is running well ahead of that in the EU as a whole. This shows a UK figure for the CPI in January of 3.0% compared with a provisional figure for the whole of the EU of only 1.7%.


With such upward pressure on prices it appears that deflation is not on the immediate horizon.




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Posted in Deflation, Inflation

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