Inflation down as environment of stability continues

Phil Smith, MD of Business West

Phil Smith, MD of Business West

Figures published today by the Office of National Statistics (ONS) show that annual CPI inflation in March 2014 was 1.6%, down from 1.7% in February.

The largest contribution to the fall in inflation came from motor fuels, followed by clothing and furniture and household goods.

Goods price inflation in March 2014 was 1.0%, while services inflation was 2.3%

Phil Smith, Managing Director of Business West, comments:“The continued fall in inflation is good news, as it contributes to an environment of stability and reduces the case for short-term interest rate rises.

“We expect inflation to continue falling in the coming months before edging up gradually, but it is unlikely to exceed the 2% target.

“It is therefore the right approach from the Bank of England to maintain clarity over its forward guidance policy so that businesses can continue to plan ahead and invest.

“Economic growth should receive a further boost shortly when wages increase by more than inflation.

“But for a secure and lasting recovery, the government should continue to provide further measures in key areas such as improving access to finance for growing firms, and supporting our exports and investment.”
Ben Brettell, Economics Editor, Hargreaves Lansdown commetns: “Today’s figures confirm the complete absence of pressure on the Bank of England to raise interest rates.

“The Bank of England is now targeting the UK’s ‘output gap’ rather than unemployment.

“The Office for Budget Responsibility forecast this won’t close until 2018 – combined with continuing low inflation this gives Mark Carney plenty of leeway to keep rates low, and I don’t expect them to rise until mid-2015 at the very earliest.”