Inflation CPI basis slowed to 2.8% in May down from 3% in April. The largest downward pressures to the change in CPI annual inflation between April and May
came from motor fuels and food & non-alcoholic beverages.
The rate of RPI and RPIX inflation fell to 3.1% from 3.5%, The largest downward pressures to the change in RPI annual inflation between April and May came from petrol & oil and food.
World trade is slowing with some respite to manufacturing and commodity prices. Oil prices Brent Crude basis in dollar terms fell by 9% in the month down by 5% year on year.
For the Bank of England and the MPC the figures represent good news in pursuit of the inflation target. Inflation is likely to fall towards the 2% level in the final quarter of the year. For those more fearful of deflation, the news casts more long shadows and black clouds over Threadneedle Street.
The minutes of the MPC June meeting were released today. More water on the drowning seems likely with another dose of QE on the way as early as next month. It was a near run thing in June as the minutes reveal :
Proposal : The Bank of England should maintain the stock of asset purchases at £325 billion. Five members of the Committee (Charles Bean, Paul Tucker, Ben Broadbent, Spencer Dale and Martin Weale) voted in favour of the proposition.
Four members of the Committee voted against the proposition. The Governor, David Miles and Adam Posen preferred to increase the size of the asset purchase programme by £50 billion to a total of £375 billion. Paul Fisher preferred to increase the size of the asset purchase programme by £25 billion to a total of £350 billion.
Martin Weale is unlikely to hold out for long. July could see more QE. Can anyone explain what this policy on Planet ZIRP really achieves? Not if you read This Discussion Paper from the Saturday Economist. What’s wrong with QE and the Asset Purchase Facility.
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