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News: Steep fall in UK inflation surprises experts

Sat, 16 Nov 13

Here, Azad Zangana, European Economist at Schroders, considers the latest Consumer Price Index report from the Office of National Statistics...

"According to the ONS, UK annual consumer price index (CPI) inflation fell from 2.7% in September to 2.2% in October – representing the fastest fall in the annual comparison since June 2011. The slowdown in inflation was largely caused by recent falls in the prices of petrol and diesel, but also a smaller rise in education tuition fees this year compared to last.

"When excluding the impact of volatile components such as food, energy and alcoholic beverages, the ‘core’ rate of inflation has fallen to 1.7%, which is its lowest levels since September 2009.

"We have been anticipating falls in the inflation rate for a while, although the larger than expected fall this month took us and the market by surprise.

"The lower than expected inflation rate should help allay fears that the Bank of England will be considering raising interest rates in the near future. While the unemployment rate is falling faster than the Bank had expected, inflation is also falling at a faster pace too."

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