NBS: Food prices are dropping

NBS: Food prices are dropping

Troy Powers
January 18, 2018

'Services inflation excluding airline fares as well as education and rents-which are influenced by government policies-fell to 2.8% in December from 3.2% in November, well below the 3.7% average of the 1997-to-2007 period, ' said Samuel Tombs of analyst Pantheon Macroeconomics.

Toys, games and hobby prices also helped drive down inflation figures, dropping 2.7 per cent.

The ONS also said it was too early to say whether this was the start of a longer-term reduction in the rate of inflation.

United Kingdom inflation retreated slightly last month, reducing pressure on the Bank of England over interest rates.

His thoughts were mirrored by Lucy O'Carrol of Aberdeen Standard Investments, she said: "what matters most for the long-term health of the United Kingdom economy is improving its productivity performance". Given the continued headwind posed by Brexit uncertainty, I don't see why the Bank of England would rush to raise rates again this year. The recent rise in global crude oil prices may sustain, especially on account of the Opec's decision to maintain production cuts through next year.

What a difference a 10th of a percentage point makes.

CPI hit 3.1 per cent in November, prompting Bank of England governor Mark Carney to write to the Treasury, explaining the rise. The last time British wages grew more than 3 percent on a sustained basis was in 2009.

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Saunders - who first voted for rates to rise in June 2017 - declined to comment on the most likely path for rates in a question-and-answer session after his speech.

CPIH, which the ONS are now using as their headline measure and which includes owner occupiers' housing costs, was 2.7% in December, down from 2.8% in November.

For the same reason the recent rally in sterling, which if it lasts should bring down the cost of imports, isn't yet benefiting consumers.

The cost of living dropped to three per cent in December, from a six-year high of 3.1 per cent the previous month.

Nossek warned the rising oil price could prove to be the main sticking point, posing the risk of stagflation. In the 2018 national budget, Finance and Economic Planning Minister Patrick Chinamasa said on the outlook, the biggest threat emanates from inflationary pressures the economy faces from potential general price hikes driven by speculative tendencies, arising from the mis-match between electronic bank balances and available foreign exchange.

However, if wages increased at a better pace then "a sustained trend of falling inflation and better wage growth could spell happier times for the United Kingdom consumer, and the United Kingdom economy".

"Such a scenario could represent a real challenge to United Kingdom consumers, as with real GDP growth somewhat muted and no wage hike pressures, the bank could look through rising commodity prices as short-term, creating the risk of stagflation for savers and investors".