Inflation Levels in October 2018

Inflation remains at 2.4 Per Cent: The Office for National Statistics has released inflation figures for October 2018 with headline CPI inflation remaining 2.4%pa, the same as September and still down from August's 2.7% pa yet the old measure of inflation, RPI, went back up by 0.1% from 3.2%pa to 3.3% pa.

Inflation + Housing Costs CPIH

The Consumer Prices Index including owner occupiers’ housing costs 12-month inflation rate again remained at 2.2% pa compared to September.  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) remained at 2.4% pa.  This is a key Bank of England (BoE) number and further relieves pressure on the Bank of England to increase interest rates.

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

RPI increased marginally from 3.2%pa to 3.3% pa when compared to September.  Although this is no longer an official 'National Statistic', it certainly gives an indication that the pound is still weak and not relieving pressure on the Bank of England to increase interest rates.  We suggested last month that underlying inflation will gradually increase and there has been a slight upswing here.

Comment

We expect that with CPI remaining the same and RPI marginally up, the pound is weaker but interest rate increase pressure will gradually build.  We are stumbling towards Brexit but with wage inflation on the up, unemployment marginally up but still at lower levels not seen since 1975, inflation will, we believe, move steadily upwards over the next few months without Bank of England intervention.