So far as today’s inflation figures are concerned, it’s April all over again. Just like then, CPI inflation has fallen (in this case, from 4.5 per cent to 4.2 per cent). And just like then, I’d urge against excitement. We are still, don’t forget, ballooning above the target level by over 2 percentage points. And forecasters, including the Office for Budget Responsibility, expect us to remain above that level for months, perhaps years, to come:
Besides, there are some components of today’s inflation figures that are particularly concerning. Take food prices. As we said on the Coffee House Twitter feed, they’re inflating at their fastest rate for 2 years. Meat prices alone went up by 2.5 per cent last month, and 8.5 per cent over the past year. These are the miseries that people notice; writ, as they are, in black-and-white on store receipts and credit card bills. And their wages aren’t keeping pace, either.
And so the Bank of England’s essential dilemma remains. Does it raise interest rates to stem the inflationary tide? Or does it eschew its target, and maintain rates at emergency lows to prop up the recovery? Given the recent rumblings about a return to negative growth, I suspect the MPC will hold course. The recovery, such as it is, will punish our pocketbooks.