Home-grown inflationary pressures will still be of concern to the Bank of England

Commenting on today’s data from the Office of National Statistics that showed the rate of CPI inflation falling from 10.1% to 9.9% in August, Kitty Ussher, Chief Economist at the Institute of Directors, said:

“This is the first time that the inflation rate has fallen since September last year, and will be reassuring to businesses for whom ever-rising headline rates are a driving factor behind an overall lack of confidence in the UK economy.

“However the fact that the falling headline rate is due to changes in the price of petrol and diesel, which is driven predominantly by the international price of oil rather than by domestic factors, means today’s news is unlikely to alter expectations of a rise in interest rates when the Bank of England meets next week.

“In fact, the inflation rate for locally-produced products and services such as dairy and personal care items continued to rise in August; it is home-grown inflationary pressures such as these that are the main concern of the Bank of England.”