Inflation remains 'surprisingly' static

Published by Hannah Nemeth on 18 July 2018.
Last updated on 18 July 2018

A pile of pound coins

Inflation figures released today by the Office for National Statistics (ONS) recorded no change in growth levels.

Official figures from the ONS show a 2.4% rate of inflation as measured by the Consumer Price Index (CPI) for the third month in a row. The ONS’ preferred measure of inflation, CPIH, which includes housing costs, was a little lower at 2.3% – the same as last month. 

Meanwhile, wage growth remains at 2.5%, so, like last month, workers are finding that their earnings are hardly outstripping inflation.

Commenting on the figures, Tom Stevenson, investment director for personal investing at financial provider Fidelity International, says that June’s static figure of 2.4% had come as a “huge surprise” as it was expected to bounce back to 2.6% or 2.7%.

He explains that a higher inflation rate was expected on the back of rising fuel and energy prices, but these had been offset by falling prices for clothes and games.  

“Faster rising prices would have given the Bank of England cover for an interest rate hike next month. Now it looks odds on that the MPC [Monetary Policy Committee] will hold fire yet again. That’s particularly the case after yesterday’s wage growth data emerged weaker than expected at 2.5% including bonuses,” he adds.

“As well as stagnant real incomes, the Bank of England will be mindful of the deepening economic and political uncertainty as well as the potential for inflation to soften again as petrol price hikes drop out of the comparisons. August’s expected rate hike is, therefore, even less of a dead cert than it was before today’s surprise inflation print. It is now entirely possible that the Bank will delay until November or even next year.

“Even if the Bank of England does press ahead with its August rate hike, savers shouldn’t get too excited as interest rates are likely to remain well below inflation for the foreseeable future.”

‘Cash savings eroded’

Simon Longfellow, head of Stepstoinvesting.com, a step-by-step guide to investing from asset manager Janus Henderson, agrees: “For yet another month, we continue to see high inflation. This, coupled with last month’s interest rate decision, means consumers will continue to see their money being eroded. Looking ahead, after a positive month for the UK with the hot weather and a summer of sport boosting the UK economy, we may well see the Bank of England increase rates as early as next month.

“But it’s important not to lose sight that cash savers will continue to see next to nothing on their money.”

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Inflation is not surprisingly

Inflation is not surprisingly static. The plain truth is that CPI is a flawed system which does not reflect the true cost of living. It is heavily weighted by the skilful use of minority activities to not reflect the true rise in the cost of living. The RPI was bad but CPI is worse as was said at the outset. It is designed to reduce the cost to the Government of the annual upratings of benefits etc. and works well when looked at in that light.

Why has this writer failed to

Why has this writer failed to mention the Retail Price Index?
For the record, the rate of inflation for June 2018 was 3.4%.