A big fall in inflation

For the first time in some months inflation came in below expectations, consumer price inflation dropping from 2.9% to 2.3% and retail price inflation going further into negative territory, -1.2% versus -0.4% in March. Lower gas, electricity and food prices, unwinding some of last year’s big increases, contributed to the fall.

This should remove some of the worries about the ‘stickiness’ of inflation and of inflation being a problem over the next couple of years. RPIX inflation, the Bank’s old target, is at 1.7% (down from 2.2%) well below its old 2.5% target. CPI inflation will soon be below its 2% target. The next letter the Bank of England governor will have to write will be to explain why inflation has dropped more than a percentage point below target. The favoured timing for that is late summer. More details here

Originally published at David Smith’s EconomicsUK and reproduced here with the author’s permission.