IoD says rate rise prospect is dead

Dated: 12 July 2011

Commenting on the latest fall in the headline inflation rate, Graeme Leach, Chief Economist at the Institute of Directors said:

“The fall in the headline rate of CPI inflation from 4.5 to 4.2 per cent in June is good news, as is the decline from 2.8 to 2.6 per cent in the CPI excluding indirect tax effects. Today’s figures kill any chance of a rate rise this year. And with inflation set to tumble in 2012, there may not be any rate rise next year either.

He also said:

The fall in the CPI index in July last year means that the headline inflation rate may edge higher next month, but thankfully the inflation peak may now be below 5 per cent. The latest CPI vindicates the MPC’s decision to keep the base rate on hold. As global price pressures and indirect tax effects fall out of the index in 2012, headline inflation is likely to fall very sharply. A year from now we could be worrying about potential deflation, not inflation, given the weakness of the money supply.”

ENDS

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Email: edwin.morgan@iod.com
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Notes to editors

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