Inflation: Low and still lower

Posted: January 16, 2015 in economy
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UK Only Article: 
UK article only


Seize the day

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Tanking inflation postpones the return to economic normality

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Happy beneficiary of an alarming trend

Happy beneficiary of an alarming trend

GEORGE OSBORNE, the chancellor of the exchequer, rejoiced at the news on January 13th that consumer price inflation fell to just 0.5% in December. He even cited it as further proof that his “long-term economic plan” is working. Yet he will soon receive a letter from Mark Carney, the governor of the Bank of England, explaining why inflation has fallen so far below its 2% target (see chart). So is very low inflation something to trumpet or something to apologise for? The answer is neither.

Early in 2014 the Bank of England forecast that prices would rise by a routine 1.9% in the final quarter of the year. Since then two things have weighed on them. The first and biggest is cheap oil, which has dragged fuel prices down by 11% in the last year. Petrol prices are …

via Economic Crisis


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