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Tuesday, September 15, 2009

UK Inflation Stickier than Expected

FT Alphaville reports:

So where’s the deflation which Bank of England governor Mervyn King is so desperate to avoid?

The UK’s rate of inflation is slowing — but it’s certainly not nearing deflation levels. The Consumer Prices Index annual inflation rate was 1.6 per cent in August, down from 1.8 per cent in July, and its lowest since January 2005. Expectations, however, were for a 1.4 per cent year-on-year rate.

Inflation is proving stickier than expected.

Furthermore, if you strip out food and energy, you get 1.8 per cent for core inflation in August — hardly deflationary. Likewise, while the Retail Price Index, which includes housing costs and mortgage interest payments, fell by 1.3 per cent in August. If you remove those mortgage payments, however, you get a rise of 1.4 per cent — up from 1.2 per cent in July.

Source: Statistics.UK