Inflation is on its way down, but how far will it go?

Posted by admin on 20 November, 2008 under Business news | Be the First to Comment

It’s official, UK inflation is falling and in October the rate fell to 4.5% having hit 5.2% in October.

We have seen that oil prices have been falling dramatically, with Nymex Crude sitting at just over $52 a barrel despite Opec reducing production to try to keep the price high. The fall in oil price has been filtering through to the economy lowering transport costs and with food prices falling too inflation has fallen.

There is however talk about the possibility of “deflation”, however, this is probably a bit premature with inflation still about 4%. The Bank of England has hinted at further interest rate cuts and there is a possibility that rates could fall to 2% by early next year.

The UK is not the only country with falling inflation and lower consumer confidence, the US has seen record falls in consumer prices when it dropped by 1% in October. This compares to a lower than expected fall in the UK where retail sales fell by just 0.1% in October, which is lower than the expected 1%. Retailers are having a hard time and are competing by discounting their prices!

The latest slow-down figures have again hit world stock markets with the Dow Jones falling by just over 5% and Japan’s Nikkei falling by just under 6.9%! The London FTSE is presently trading with a fall of just over 2%.

Better news for the property market

According to the Council of Mortgage Lenders (CML) mortgages in October picked up slightly, up by 7% over September.

“CML data shows that gross mortgage lending totalled an estimated £18.7 billion in October, almost 7% higher than what was an admittedly weak £17.5 billion lent in September. The monthly total was 44% lower than gross mortgage lending of £33.4 billion in October 2007″ Per the CML