Relief for King as price rises start to ease at last

Inflation fell back to 5 per cent in October – from 5.2 per cent the previous month – giving policymakers hope that price rises across the economy have now peaked.

The latest report from the Office for National Statistics (ONS) yesterday also showed that annual retail price inflation, which includes housing costs, fell to 5.4 per cent last month, down from 5.6 per cent in September.

The ONS said that the fall in annual consumer price inflation (CPI), which was slightly more than economists expected, was due in part to a decline in the cost of food, with supermarkets discounting their products in order to increase market share and prices driven down by a decent harvest in certain goods.

The price of fruit was down 1.6 per cent. Vegetable prices were down 2.4 per cent. A decline in air fares and a fall in the price of petrol also contributed to the drop in the overall CPI index. The price of air travel fell by 6 per cent on the previous month and pump prices were down 0.5p per litre.

Despite the fall in CPI , the index remains well above the Bank of England's target rate of 2 per cent and the Bank's Governor, Sir Mervyn King, was compelled to write another letter to the Chancellor George Osborne to explain why price rises are still overshooting. In the letter, Sir Mervyn reiterated the Bank's forecast that inflation will drop sharply next year thanks to slowing economic growth and as distorting effects, such as this year's increase in VAT and rising global commodity prices, fall out of the system.

The greater risk over the medium term, according to the Governor, is that the Bank will undershoot its 2 per cent target. That is why the Monetary Policy Committee voted unanimously to increase its £200bn Quantitative Easing programme by £75bn in October. The Bank is expected to unveil a sharply lower growth forecast for 2012 when it releases its quarterly Inflation Report.

There was, however, an ominous sign that price increases in the British economy might prove to be more persistent than policymakers believe. Annual core CPI inflation, which strips out variable factors such as oil and food, rose to 3.4 per cent in October. This was in large part was due to increases in the prices of clothing, games, toys and media.

"This sits oddly with the weakness in high street spending and one can only assume retailers are still passing on higher costs following the fall in the exchange rate a couple of years ago," Karen Ward, at HSBC, said.

The Government welcomed the fall in CPI, but said that it is still committed to action to mitigate the effects of rising prices on the public.

A Treasury spokesman said: "Whilst price inflation eased slightly in October, the Government recognises that these are difficult times for households as prices continue to be affected by conditions in the global oil and gas markets. The Bank of England has forecast that inflation should fall rapidly over 2012, but in the meantime the Government is taking action to help consumers with current high costs, including by increasing the personal tax allowance and freezing council tax, having also cut fuel duty".

But Labour said that the Government would do more good by reversing its hike in VAT to 20 per cent, up from 17.5 per cent. The shadow Treasury minister Owen Smith said: "Reversing January's VAT rise temporarily... would ease the squeeze on families and help to kick-start our flat-lining economy."

Suggested Topics
Arts and Entertainment
TV Review: Sabotage, a meltdown and, of course, plenty of sauce
News
newsVideo for No campaign was meant to get women voting
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
i100'Geography can be tough'
PROMOTED VIDEO
Sport
Louis van Gaal looks dejected after Manchester United's 4-0 defeat by MK Dons on Tuesday night
sport
News
Actor, model and now record breaker: Jiff the Pomeranian
Video
News
REX/Eye Candy
science
News
i100
News
Down time: an employee of Google uses the slide to get to the canteen
scienceBosses are inventing surprising ways of making us work harder
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

£50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?