Commenting on the inflation figures for August, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“Annual CPI inflation was unchanged in August, despite expectations that there would be a decline. However, RPI inflation was slightly down and earlier figures published this week show that producer price inflation is also easing.
“Overall, it would be wrong to overreact to these figures by raising interest rates and withdrawing the support provided by quantitative easing. While the MPC cannot ignore long-term risks, there is no sign that inflationary expectations in the economy are worsening.“People’s disposable incomes are being squeezed, and the pressures facing businesses will inevitably worsen as the government implements its forceful deficit-reduction programme. If the MPC was to consider tightening policy in these circumstances, risks of a serious economic setback would increase. Given this background, we urge the MPC to maintain its current expansionary policy approach, as the balance of probabilities still suggests that UK inflation will decline sharply in the next 12 months.”