Belfast Telegraph

Food price wars push inflation down from 5% peak

By Peter Cripps

Supermarket price wars and the falling cost of petrol last month helped push inflation down further from its peak, official figures have revealed.

The Consumer Prices Index (CPI) rate of inflation fell to 4.8% in November, the Office for National Statistics (ONS) said, compared to 5% the previous month.

The Bank of England's inflation target is 2% - but with inflation tipped to fall below target over the next year, the Bank's Monetary Policy Committee may launch more quantitative easing following its £275bn efforts so far.

Northern Bank chief economist Angela McGowan said: "Sharp falls in inflationary pressure are expected in 2012 as all those 'temporary factors', such as the Vat hike and the oil price spike, will fall out of the year on year comparison. But in particular, very weak domestic demand and feeble economic activity are working to pull inflation down even further."

And below-target inflation would be a headache for the Bank of England and would signal the need for more monetary stimulus.

"That stimulus will probably come sooner rather than later. The first increase is expected in January and could be either £50bn or £75bn," she said.

"The former would signal that the Bank is levelling off while the latter would indicate that monetary stimulus continues unabated and more might be coming."

She said total quantitative easing could amount to £400bn by the end of next year.

"Assuming there is an improvement in European matters, any stimulus coming from the Bank of England early in the year should help the UK economy to expand in the second half of next year."

According to the CPI, the cost of food and non-alcoholic drinks rose at its lowest rate since July 2010 after supermarkets launched aggressive price wars and a strong harvest saw the price of fresh vegetables and bread fall.

Vicky Redwood, chief UK economist at Capital Economics, said: "November's UK inflation figures provide further hope that inflation has now passed its peak and could soon fall pretty sharply."

4.8%

The rate of inflation has dipped, spurred on by food and fuel price falls

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