The Consumer Prices Index (CPI) fell to 5% in October down from 5.2% in September. This is mainly as a result of falls in the price of food, air transport and fuel. However inflation still remains way above the Bank of England’s target of 2%.
Price Changes
Food prices fell as a result of heavy cost cutting by the supermarkets and good harvests. Flight costs are known to fluctuate wildly and are 6% lower than they were last year. The cost of us filling our cars up with fuel has also decreased with petrol 0.5p a litre lower. Items increasing in price were clothing, electricity and gas. Energy supply companies have recently been increasing bills and this is expected to have an impact on November’s inflation figures.
Dear George
The latest figures mean that Mervyn King, the Governor of the Bank of England has had to write to George Osborne the Chancellor of the Exchequer to explain why inflation is above the 2% target.
In his letter he says that the high level of inflation is due to “the increase in the standard rate of VAT earlier this year, and previous steep increases in import and energy prices.” He goes on to say that without these temporary measures inflation would be below the 2% level.
