Inflation at 2.7%—The New Norm?

Consumer price inflation came in at 2.7% in December, the same as in November and October. Though this shows a very sticky inflation rate, there was some relief that it was not a bit higher. RPI inflation edged up from 3% to 3.1%. For those who are interested, the new RPIJ inflation measure, were it published, would also have shown inflation edging up, from 2.1% to 2.2%.

There isn’t an enormous amount of inflationary pressure in the economy – producer output price inflation in the 12 months to December was just 2.2%, while input price inflation was a mere 0.3% – but a return to the 2% inflation target seems as remote as ever. If it isn’t the threat of higher food prices, administered prices or university tuition fees, or other factors, can be relied on to keep inflation high.

Should we expect anything better? The December figures completed a year in which the average CPI inflation rate was 2.8%. The average rate for the past eight calendar years (2005 to 2012) was 2.9%. Only for a relative brief period in recent years (1997-2004) has CPI inflation been consistently below the 2% target. More on Tuesday’s numbers here.

This piece is cross-posted from David Smith’s Economics UK with permission.

2 Responses to "Inflation at 2.7%—The New Norm?"

  1. Steve   April 9, 2013 at 6:38 am

    Everything could be thrown into chaos if stuff like what is happening in Cyprus keeps happening.

  2. picture   May 1, 2013 at 8:18 am

    If the salaries were a major prerequisite for black picture frames FDI Sudan would have attract the most FDI in the world!