Which way is inflation heading? Does anyone know?

Posted on March 23rd, 2010 | Categories - Financial News

Only last week the Bank of England said that they believed inflation would stay higher than their target of 2% for some time to come, this may still be true but latest official figures indicate that at least one measure of inflation has decreased over the past month.

Figures show that the CPI (Consumer Prices Index) fell from 3.5% in January to 3% in February.

The other measure of inflation, RPI (Retail Prices Index), which N S & I use on their Index Linked Certificates, remained unchanged at 3.7%.

The fall in the CPI was greater than analysts had expected and was put down to utility price cuts and food price rises last year which have not been seen this year.

Many will hope that this fall in the CPI means that inflation has peaked and will continue to fall during the year, although the warning delivered by the Bank of England last week will be at the back of people’s minds as they watch the course of inflation over months to come. It certainly seems the period of inflation stability seen over the past 10 years are over, since 2009 there have been wild swings in the various measures of inflation and it is clear that predicting the level of increases and decreases is becoming ever harder.

Certainly savers will hope that the latest fall in the CPI continues in months to come, it will certainly make finding a real return on savings easier than it has been over the past few months. Although NS&I Certificate still look a good bet as they are linked to RPI which has stayed constant.

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