Inflation Falls Again

Inflation Falls to 2.4 Per Cent.

The Office for National Statistics has released inflation figures for April 2018 with headline CPI inflation falling to 2.4% pa yet the old measure of inflation, RPI, creeping back up 3.4% pa.

Inflation + Housing Costs CPIH

The Consumer Prices Index including owner occupiers’ housing costs 12-month inflation rate fell from 2.3% pa to 2.4% pa.  This is known as CPIH and a benchmark we believe that now includes owner occupier housing costs as mortgage interest rates are low.  This is not CPI but CPIH.

Consumer Prices Inflation CPI

The Consumer Prices Index (CPI) fell from 2.5% pa to 2.4% pa.  This is a key Bank of England (BoE) number and relieves pressure on the Bank of England to increase interest rates.

Retails Prices Index (RPI) – the old measure of inflation

RPI went up from 3.3% pa to 3.4% pa.  Although this is no longer an official 'National Statistic', it certainly puts a little pressure on the Bank of England to increase interest rates and strengthen the £ as imported food and goods price increases have slowed a little.

Comment

The Office for National Statistics suggests that the decrease was due to prices falling for air travel and food.  The £pound weakened with lower inflation last month as the threat of interest rate increases reduced.  That said, for May and June, with weaker pound, food and travel costs will again rise, meaning we expect both RPI and CPI to increase this month and next. A weaker pound has driven stock markets up but we expect, and indeed it started today, for stocks to fall back.   If interest rates do increase next soon it will hit stock markets.