MPC must remain cautious despite fall in inflation

17th September 2013

·         Annual CPI inflation was 2.

7% in August 2013, down from 2.8% in July 2013 ·         Annual RPI inflation was 3.3% in August 2013, up from 3.1% in July 2013 ·         The largest contributions to the fall in the CPI rate came from motor fuels, air transport, and clothing; these were partly offset by upward contributions from furniture and household equipment   Commenting on the inflation figures for August 2013, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:   -The fall in inflation will ease pressure on businesses and consumers at a time when earnings growth is only around 1%, and the government is still pressing ahead with cutting the budget deficit. Our forecast remains that inflation will fall gradually over the next year, but unexpected surges in energy and food prices remain a risk.   -As the economic environment remains uncertain, the Bank of England's forward guidance continues to reassure businesses in spite of scepticism from the markets. But the MPC must be equally firm in demonstrating its commitment to low inflation, and strive to bring it down to the 2% target within a reasonable timeframe. With this in mind, and with the US considering scaling back its own stimulus, we hope the MPC does not add to QE. The economy is now recovering at a moderate pace, and the government and the MPC must do everything possible to maintain stability so that these positive trends continue during the months ahead.

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