By Daniel Hunter
Despite a drop in inflation David Kern, Chief Economist at the British Chambers of Commerce (BCC), said the fall was not as great as many had expected.
Both the consumer and retail prices indexes of inflation dropped 0.2% to reach 3.4% and 3.7% respectively, after reductions in wholesale gas prices saw utility prices fall.
And Kern went on to say that the nation should not become unduly optimistic about future trends, just because inflation fell.
“Although a fall in inflation was unsurprising, it was not as rapid as most analysts expected and we shouldn’t be unduly optimistic about future trends," he said.
"The marked increases in world oil and food prices since the beginning of the year are worrying, and support our view that further declines in domestic inflation, both this year and next, will not be as sharp as the MPC predicted in its inflation report.
“It is unlikely that we will see prolonged periods of below target inflation in the foreseeable future, as suggested by the MPC. While we welcomed the Committee’s decision to increase QE, the latest trends in inflation support our view that additional increases in the amount of asset purchases are unlikely to add much value. Greater efforts are needed to ensure the new money which has been created reaches small businesses and other areas of the economy.
“The new credit easing scheme will help, but it must be supplemented by radical measures such as a fully fledged SME bank and willingness by the MPC to purchase private sector assets. Given the challenges facing the economy, it is imperative that in his Budget the Chancellor demonstrates his commitment to placing economic growth at the top of the policy agenda.”
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