Low Inflation Spreads to the United Kingdom, Rates Look Steady

by on November 12, 2013 1:33 am GMT

Inflation in the United Kingdom is expected to fall to six-month lows with the official data due out tomorrow. The Office of National Statistics (ONS) will report consumer-price data, and the decline in gas prices is a key factor in the expectations of a lower consumer-price index (CPI). Energy tariffs by gas and electricity producers are looking to have an impact in the later half of the year.

Estimates suggest the CPI for the UK will decline to 2.5 percent from 2.7 percent in September.This data will come out just a day prior to Bank of England’s Mark Carney speaks on Britain’s economy and the BoE inflation report.

The CPI expectations is still above the core two percent many central banks target. The higher consumer-prices are putting pressure on incomes with the cost of living continuing to increase.

The Bank of England (BoE) will release their outlook on inflation, unemployment and Britain’s economic condition overall. Employment has been a key factor in the BoE deciding to keep a loose monetary policy and rates at historical lows of .5 percent. Mark Carney vowed to keep rates where they are until unemployment reaches seven percent, which is forecasted to be sometime in 2015 or possibly 2016. Analysts, though, are not sold that a bettering in unemployment will not be a sure trigger for a rate increase.

Declining inflation and stagnant unemployment are enough to keep rates at bay for the foreseeable future.