Tuesday, 14 October 2014

Tablet computers and air fares help drive CPI Inflation down to a five year ...

Prices for hardback books and ebooks also contributed to the slowdown in the rate of inflation



Tablet computers help drive down inflation


Inflation fell to a five year low of 1.2% in September down from 1.5% in August, according to the Office for National Statistics (ONS) .


The ONS this morning confirmed falls in air fares and the price of laptop and tablet computers helped drive down the Consumer Prices Index (CPI) rate of inflation .


Prices for hardback books and ebooks also contributed to the slowdown in the rate of inflation.


The CPI figure means that state pensions will rise by 2.5% or £2.85 a week next spring as the Government's 'triple lock' ensures an increase of whichever is the greater out of average earnings, September's inflation rate or 2.5%.


The Bank of England targets inflation at 2% but it has now been below this level for nine months in a row. Governor Mark Carney must write to the Chancellor to explain if it is more than 1% higher or lower.


Low inflation removes any immediate pressure on the Bank to raise interest rates amid the continuing uncertain recovery in the wider economy.


It also eases some of the strain on household budgets - although real-terms pay is still falling, with latest figures due out tomorrow expected to show it remains below 1%, lagging behind inflation.


However, policy-makers will be concerned if there is a danger of CPI becoming too low.


Ultra-low inflation in the eurozone has prompted emergency rate cuts and stimulus by the European Central Bank as it battles to stave off a damaging deflationary spiral.


Today's ONS figures showed that petrol fell by 0.8p per litre in September compared with the previous month, and diesel by 0.7p, amid tumbling oil prices.


Restaurants, cafes and canteens saw lower price rises than in the same month a year ago.


The ONS said that were it not for the impact of falling food and motor fuel prices - the latter of which were down 6% - the rate of inflation would be around a third higher at 1.6%.


CPI has not been lower since September 2009, when it stood at 1.1%.


The Retail Price Index (RPI), a separate measure which includes housing costs, fell from 2.4% to 2.3%, its lowest level since November 2009.


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