UK Inflation at Lowest Level Since 2016
The Office for National Statistics (ONS) has released the latest official figures for inflation levels in Britain. The inflation rate is the sustained increase in general price levels and is usually defined as a percentage change over a year. In the month of October, the Consumer Prices Index (CPI) was 1.5%, meaning that prices were 1.5% higher than in the same point last year, but CPI was 0.2% lower (from 1.7%) than in September. The Bank of England had previously forecasted that CPI inflation for October would be 1.6%. This is marginally out from the Bank’s prediction and half a percentage point off the bank’s target rate of 2%. The non-official Retail Prices Index (RPI) has also fallen from 2.4% in September to 2.1% in October.
This fall in the inflation rate is not unexpected. Planned cuts in utility costs for homeowners are expected to filter through by spring next year, and this is reflected in the Bank’s forecast of 1.25% for this period. Whilst the Bank of England has left the door open to more base interest rate cuts in the short term, it seems that this recent announcement on inflation will not be enough to change direction on their recent decisions on intertest rates, barring other unexpected news. This could change if the election in December throws up an unexpected result and unsettles markets.
The CPI inflation level has been dropping steadily since July 2018 and it is now at its lowest level in three years. In those three years, gold has had an enormous spike, hitting a high of £1248.38 per troy ounce in August 2019. This is a rise of £296.19, or 31.11%. At the time of writing It is now trading at £1127.55 per troy ounce. Gold is remarkably resilient against changes in general price levels because it typically offers very little yield - it holds its value over time. While it may not offer significant returns as with other assets, you can be sure it will hold its worth in the future.
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The ONS October Inflation Bulletin can be found here.