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P.ublished 16th August 2023
business
Inflation Drop Blunted By Concern That The Core Rate Is Entirely Unchanged
Image by Gerd Altmann from Pixabay
TUC General Secretary Paul Nowak said:
“We all want to see lower inflation. But it will take more than price rises slowing for working people to feel better off – especially with food bills remaining sky high.
“Real wages are still worth less today than in 2008 after the longest pay squeeze in 200 years. And at the same time, unemployment and insecure work are shooting up.
“Our economy is far from out of the woods – too many long-run challenges remain unaddressed.
“We need a credible plan to deliver decent well-paid jobs across the country. The Conservatives have yet to produce one despite being in office for the past 13 years.”
“We all want to see lower inflation. But it will take more than price rises slowing for working people to feel better off – especially with food bills remaining sky high.
“Real wages are still worth less today than in 2008 after the longest pay squeeze in 200 years. And at the same time, unemployment and insecure work are shooting up.
“Our economy is far from out of the woods – too many long-run challenges remain unaddressed.
“We need a credible plan to deliver decent well-paid jobs across the country. The Conservatives have yet to produce one despite being in office for the past 13 years.”
Dr Roger Barker, Director of Policy at the Institute of Directors, said:
“It will be a relief to business leaders that the headline rate of inflation is continuing its downward trend.
“However, any celebrations will be blunted by concern that the core rate of inflation, which excludes energy and food prices, is entirely unchanged. This month's headline drop was primarily a result of the scheduled readjustment of the energy price cap.
“It's hard to avoid the conclusion that inflation has to some degree become embedded into the behaviour of businesses and consumers. This was reflected in yesterday's figures for annual wage inflation. Getting back to the Bank of England's 2% inflation target will be a challenging process.”
“It will be a relief to business leaders that the headline rate of inflation is continuing its downward trend.
“However, any celebrations will be blunted by concern that the core rate of inflation, which excludes energy and food prices, is entirely unchanged. This month's headline drop was primarily a result of the scheduled readjustment of the energy price cap.
“It's hard to avoid the conclusion that inflation has to some degree become embedded into the behaviour of businesses and consumers. This was reflected in yesterday's figures for annual wage inflation. Getting back to the Bank of England's 2% inflation target will be a challenging process.”
Inflation data doesn’t justify rate rise
Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, said:
“The inflation data shows a welcome fall in the headline rate, but core inflation that excludes food and energy remains stuck at 6.9 per cent. The headline rate is also likely to tick up in August, reflecting higher fuel and alcohol prices, some unhelpful base effects, and the continued strength of the labour market.
“There are still plenty of reasons to expect inflation to tumble over the rest of the year, notably the sharp slowdown in money and credit growth. Rising unemployment and falling vacancies suggest that wage pressures will soon peak too.
“Unfortunately, the Bank of England continues to look backwards at the headline data over the last month or two, rather than pause to assess the impact of the substantial tightening in policy that is already in place. This makes another unnecessary interest rate increase more likely.”
Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, said:
“The inflation data shows a welcome fall in the headline rate, but core inflation that excludes food and energy remains stuck at 6.9 per cent. The headline rate is also likely to tick up in August, reflecting higher fuel and alcohol prices, some unhelpful base effects, and the continued strength of the labour market.
“There are still plenty of reasons to expect inflation to tumble over the rest of the year, notably the sharp slowdown in money and credit growth. Rising unemployment and falling vacancies suggest that wage pressures will soon peak too.
“Unfortunately, the Bank of England continues to look backwards at the headline data over the last month or two, rather than pause to assess the impact of the substantial tightening in policy that is already in place. This makes another unnecessary interest rate increase more likely.”
Alpesh Paleja, CBI Lead Economist, said:
“A big fall in inflation was widely expected in July, given the 37% cut to Ofgem’s energy price cap. However, the Bank of England will be more concerned about signs of persistent domestic price pressures. In particular, the latest data points to continually strong wage growth, which means that more interest rate rises are in the pipeline.
“Inflation will continue to fall through the remainder of this year. While this is welcome news for households, the Bank has been clear that they’re willing to keep interest rates higher for longer if needed, to reign in price pressures. So, at least for the time being, tighter financial conditions for households and businesses look like they’re here to stay.”
“A big fall in inflation was widely expected in July, given the 37% cut to Ofgem’s energy price cap. However, the Bank of England will be more concerned about signs of persistent domestic price pressures. In particular, the latest data points to continually strong wage growth, which means that more interest rate rises are in the pipeline.
“Inflation will continue to fall through the remainder of this year. While this is welcome news for households, the Bank has been clear that they’re willing to keep interest rates higher for longer if needed, to reign in price pressures. So, at least for the time being, tighter financial conditions for households and businesses look like they’re here to stay.”