By Marcus Leach
The latest inflation figures, released by the Office for National Statistics (ONS) have shown that September's Consumer Prices Index (CPI) was down to 2.2%, its lowest level since November 2009.
The ONS said that the rate of inflation on the CPI measure slowed from 2.5% in August to 2.2% in September. Meanwhile the Retail Prices Index (RPI) measure stood at 2.6% in September down from 2.9% the month before.
Despite this drop, Jeremy Cook, chief economist at World First, the foreign exchange company, said that people should not get too excited by the drop, as there are certain mitigating factors.
“This slip is mainly as a result of the “falling-out” of last year’s energy price increases from utility companies," he said. "However, Friday’s news of further gas price increases ensure that any comfort from this number will be short-lived especially on wage price fronts.
“Food price inflation will also become a worry through the end of 2012 following a particularly wet summer here in the UK and a pernicious drought in the agricultural Midwest of the US. The UK’s Department for Environment, Food and Rural Affairs estimates that wheat production has slipped by around 13%, with falls also being recorded in both barley and rapeseed crops.
“The recent strength of sterling vs the euro (our main import partner) will not have hurt either.
“So, while this near-term fall in inflation should be welcomed, it will mark the bottom and we should be aware that a bounce-back is not far behind. This decline will however, allow the Bank of England a little more breathing room when expanding QE by £50bn at next month’s MPC meeting.”
It is also expected that a range of benefits are likely to rise by 2.2% next April. Increases in a range of benefits from Jobseeker's Allowance to income support are based on September's Consumer Prices Index (CPI), and are set to change.
However, the basic state pension will rise by a minimum of 2.5% owing to a government guarantee.
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