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Downward pressure from air fare, food and fuel discounting prompts 0.2% decline in inflation

The headline rate of inflation dropped away in October to 5%.

The fall in the annual CPI rate, from 5.2% in September, will be seen as vindication for forecasts that inflation is set to fall away significantly over the next year.

The target for CPI inflation is 2% but despite it remaining stubbornly high in recent months, concerns about the strength of the economic recovery has led the Bank of England's Monetary Policy Committee to focus on encouraging growth.

According to the Office for National Statistics, supermarket discounting on food, falls in air fares and petrol costs were the main sources of downward pressure on inflation.

Coverage of the inflation data is brought to readers of in association with stockbrokers Redmayne-Bentley.

Senior stockbroker David Scott said: "The official measure of inflation the consumer prices index softened to 5% during October, slightly below a forecast of 5.1% and down from the shock jump to 5.2% in September. This may well herald a peaking in the rate which has overshot the MPC’s 2% inflation target every month since December 2009.

"The Bank of England’s latest quarterly Inflation Report is published tomorrow and is expected to predict that inflation will fall sharply in early 2012, as temporary factors including January’s VAT rise fall out of annual comparisons. It is also expected to say inflation is on course to fall below target within two years, indicating that interest rates could remain at the historically low level of 0.5% into 2013.

"The continuing chaos that is Europe and which looks to be heading for a recession will also remain a downward pressure on economic activity and therefore UK inflation."

The RPI rate of inflation, which includes mortgage costs, fell from 5.6% to 5.4% in October.

Source : James Reed - The Business Desk Yorkshire

15 November 2011
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