UK January Inflation figures good news for homeowners

The latest CPI inflation figures released by the bank of England show that the main inflation rate was 2.7% in January. This is a fall of 0.3% on the December figures.

However the old method of calculating inflation, the RPI was 4.2%. This higher inflation figure is mainly because it includes mortgage interest payments. The latest RPI inflation figures are high because they include the recent quarter point rise in inflation.

The main downward pressures on inflation this month are from falling petrol and fuel prices. Also some communication costs and airtravel is lower than this time last year.

The effect of a lower inflation rate means that there is less necessity for an interest rate increase in the near future. With the Bank of England Governor claiming that inflation is likely to fall in the second half of the year it is even possible that the interest rate cycle has peaked.

However there are still inflationary pressures in the economy. These are coming from a resilient housing market and strong economic growth. GDP growth is currently 3% which is slightly above the long run trend rate of growth.

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