BCC: Slowing producer inflation will contribute to lower consumer inflation

David Kern
Chief Economist at British Chambers of Commerce
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Post date: Friday, 11th November 2011

The figures for October show a welcome slowdown in the pace of inflation for both output and input producer prices.

In the year to October 2011, the input price index rose by 14.1%, a high figure in absolute terms, but still the lowest annual rate since December 2010.

Slowing producer price inflation will help to ease the squeeze on businesses and consumers, and will contribute to lower consumer price inflation next year.

The figures should reassure the MPC that they are right in persevering with an expansionary monetary policy in spite of the recent increase in consumer inflation above 5 per cent.

Since this surge in CPI inflation is likely to prove temporary, the MPC must maintain low interest rates throughout next year, and continue with an aggressive QE programme.

These policies must be supplemented by measures to boost the flow of lending to businesses, and additional measures aimed at stimulating growth.

The Autumn Statement later this month, provides the Chancellor with the opportunity to demonstrate his commitment to enable businesses to drive the recovery.

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